Lord Tomlinson: My Lords, will my noble friend reflect that he has perhaps been a little too kind in his response to the question asked by the noble Lord, Lord Howell? Will he perhaps recall that the decision on the European Parliament meeting in Strasbourg took place in the presidency conclusions in December 1992? They were slipped through when the right honourable John Major was Prime Minister. If we are to criticise the decision to go to Strasbourg, should we not criticise the lack of vigilance from the Prime Minister and his aids at that summit in 1992 and charge them with the cost that we have been lumbered with ever since?

Lord Triesman: My Lords, the United Kingdom is committed to progress in multilateral disarmament and plays a strong role in all the relevant international forums. The UK has an excellent record in implementing its disarmament obligations under the NPT, and, in this regard, continues to press for multilateral negotiations towards mutual, balanced and verifiable reductions in nuclear weapons. Our priority remains the start of negotiations on a fissile material cut-off treaty, without pre-conditions, at a conference on disarmament in Geneva. We therefore welcome the draft FMCT text and the mandate for an ad hoc negotiating committee tabled by the United States on 18 May.

Lord Judd: My Lords, does my noble friend agree that part of the crisis in world affairs underlined by the ISS report issued yesterday is that a large and articulate section of world opinion is tired of being told what it must do by people who do not themselves seem to be sufficiently committed and that that underlines the importance of the multilateral approach? Does he not agree that on Iran, for example, if we are to have credibility in mobilising world opinion on our real concern, our commitment to and effectiveness in seeing through undertakings given in the context of the NPT is crucial?

Baroness O'Cathain: rose to call attention to the rise in gas prices and the implications for energy policy; and to move for Papers.
	My Lords, I begin by thanking all noble Lords who are taking part in this debate. There are only nine names on the speakers list, but what we lack in quantity we certainly make up in quality. I am particularly grateful to all of them because I know that this debate has delayed the great getaway for the Whitsun Recess. Furthermore, each person who will take part in this debate has a great interest in the subject and has made significant contributions in the past to the knowledge base of your Lordships' House on energy and all related matters.
	The genesis of this debate was that I was asked whether I would put my name down for a ballot. That happened on 23 November. When my name came up some three weeks ago, I denied ever putting it down—I had honestly completely forgotten about it. My first reaction was that we had had so many debates, including one on energy supply and another on nuclear—and your Lordships will be glad to know that that is the only time the "N" word will pass my lips—in the past six months that another one would test the patience of the House.
	My second reaction, which followed rapidly on from that, was that I thought it important that an analysis be made of the recent developments in the pricing and supply of gas, as the market for gas has been in complete turmoil over the past few months. Furthermore, the huge price rises are detrimental and will have long-term implications, not only for consumers, but also for industry in this country. In addition to price rises, there have been many changes in the market for gas in the past six months or so, and many of those have impacted on the long-term likely supply, both in this country and internationally.
	In November, the Belgium/UK gas interconnector was commissioned. Great hopes have been placed on this development, but concerns soon developed. Some 22 days later, the noble Lord, Lord Davies of Oldham, whom I am delighted to see here today, admitted in response to a Question from the noble Lord, Lord Ezra, that the under-utilisation of the interconnector was "a serious situation". He told us that,
	"the chairman of Ofgem has written to the European Commission indicating why this situation is utterly unsatisfactory".
	He went on to say that the price being offered was high enough and competitive, but that,
	"there are imperfections in the market which alone explain why this gas is not available".—[Official Report, 30/11/05; col. 216.]
	On 15 December, the tenacious noble Lord, Lord Ezra—I am sorry that he is not in his place today—asked another Question, and again the noble Lord, Lord Davies, had to field it, saying,
	"the Chancellor of the Exchequer and the Secretary of State for Trade and Industry wrote to the European Commission indicating that the malfunction of the European market—caused principally by German companies—was very serious".
	Earlier, he said:
	"I am pleased to indicate that the German equivalent of Ofgem has indicated that changes are necessary as far as the German market is concerned".—[Official Report, 15/12/05; cols. 1365-66.]
	It seemed that all the worries we had voiced about the long-term security of supply were beginning to come home to roost. We were becoming too reliant on organisations beyond our control.
	The new year of 2006 dawned and with it the most disturbing situation in the dispute between the Ukraine and Russia, which resulted in the appalling act of Russia cutting off gas supplies to Ukraine in the depths of a most harsh winter. This caused great concern not only about the plight of the people in Ukraine, but also about the implications for other countries reliant on gas supplies from Russia. The poor beleaguered Minister, the noble Lord, Lord Davies, was put in the unenviable position of praying in aid the co-operation of the European Union. He told us that the Government had brought the issue before the European Community "in very strong terms", and said:
	"I can assure the House that part of the Energy Review will look at the proper functioning of the European gas market and the provision of gas to that market".—[Official Report, 10/1/06; col. 58.]
	Ah, the energy review! On 27 February, the noble Lord, Lord Tomlinson, who was in the Chamber earlier but is not now in his place, asked his noble friend Lord Davies about the energy review and whether he would give us,
	"with greater precision some idea of when we might expect it".
	The reply was:
	"My Lords, the important thing is that the review considers all the issues in full and effectively and gets the long-term energy supplies of this country right. We are talking about decades. It is not a question of rushing out a review".
	So a long wait is forecast because it is not a question of rushing out a review. Again I quote what the noble Lord, Lord Davies, said:
	"This is not an issue to be rushed".—[Official Report, 27/2/06; col. 8.]
	I hope that it is not too embarrassing for the Minister if I ask him three questions. First, whither now the energy review? I read a tantalising article published in the Financial Times on 15 May to the effect that the review would,
	"axe the 2003 approach of relying on increased renewable energy and energy efficiency to meet the UK's targets for reducing carbon dioxide emissions".
	I have to say that I await the outcome with great interest. Secondly, who is personally in charge of the energy review? In view of the comments I have just made, I hope that it is the Secretary of State at the DTI, who seems to have read all the debates held in this House on this subject because it looks as though he is coming up with the right answers. My third question to the Minister is this: are the many people who have spent long hours over days and weeks producing submissions to this review happy that a pragmatic, politically expedient stance has been taken by the Prime Minister, who seems to have taken a one-man stand on the issue in order to win brownie points at the CBI dinner last week?
	The gas price rises have come as an unwelcome surprise to us all, although they probably should not have been. We all plan on the basis of the best and worst possible cases. I sense that no one really saw how bad the worst case could be. Until recently our economy has benefited hugely from being a producer of oil and gas, and perhaps we have become complacent. I hope that that complacency has now been put aside, but I am not sure that the message about the fragility of security regarding our future energy supplies has got through.
	I was not wholly reassured when I read that the Government set great store by the fact that,
	"President Putin is chairman of the G8 this year and has already indicated that he intends to put the security of energy supplies as the prime issue during his presidency".
	That section of the Official Report continues:
	"The recent conflict between Russia and Ukraine shows how far countries from the former Soviet bloc have to go in terms of open markets. But there is no doubt that the G8 will be a forum for these issues, particularly in the context of energy policy, as soon as it meets this year".—[Official Report, 10/1/06; col. 60]
	Truly, I do not share the Government's optimistic view. Indeed, recent reports that a former top economic adviser to the President of Russia has revealed that a new form of gas cartel is being developed between Algeria and Russia fill me with foreboding. I am not the only one. The CEO of Italian energy giant ENI has, according to a report in the Times on 23 May, told officials in Brussels that his country,
	"risked being caught in a pincer between two powerful gas exporters".
	The big increases in gas prices over the last months were not foreseen because none of us realised how high the oil price was likely to rise. The huge increase in the price of oil had a consequent impact of large increases in the gas price. There was not much that anybody could do about that, I guess. However, gas prices here in the UK were some 30 per cent higher than in continental Europe, and still are. To be fair, the additional transport costs could justify a differential, but surely an additional 5 per cent or thereabouts would be acceptable—not 30 per cent.
	Our situation became much more difficult—again, since we had all these debates in this House—due to the fire at Rough. Rough accounted for 90 per cent of our storage capacity. Another issue was described to me as the "fear factor," because of our perceived inadequate storage capability. To be fair to the Government, it was not an easy situation. We have got through the past winter—though the last couple of days do not fill me with joy that winter will not come again next week—but what are we going to do at the end of this year and in the winter to come? This is not scaremongering. All the negatives present at the end of 2005 and the beginning of 2006 are likely to prevail in the winter of 2006–07. Is there any way that the provision of additional storage can be speeded up?
	Fortunately, it seems that the current worrying situation of high gas prices is probably relatively short to medium term if the experts, including economic forecasters, are correct. The theory is that the oil price will reduce to between $45 and $50 per barrel, due to a probable downturn in economic activity resulting from high oil prices. In addition, the very large increase in LNG production should lead to an overall reduction in the price of gas. Gas prices will still be subject to market forces but, with a greatly increased supply of LNG, prices should reduce.
	The Motion talks about gas prices and energy supply; I turn now to the effect on energy supply. We have recently become a net importer of gas and can, we believe, rely on Norway and the Netherlands to meet the deficit in supplies. A new pipeline from Norway will supply some 10 per cent of peak needs, and an overall 15 per cent of annual requirement. I am informed by experts in the field that the international oil reserves are likely to run out long before the gas reserves, hence my relative optimism.
	A report prepared for the DTI by the consultants Energy Markets Ltd, entitled Conditions for Truly Competitive Gas Markets in the EU, states that the Government should promote the construction of new pipeline links and try to reduce the influence of what it calls the "incumbent producers"—namely, Algeria and Russia, to which I referred previously. This would enable us to become a transit country for gas transmission, as well as protecting the security of our supply. Incidentally, the report—which is well worth reading, if a little long and not exactly in layman's language—is available on the DTI website.
	In addition, the report recommends that more LNG terminals than we ourselves need should be built in order to facilitate this new sector of, if you like, business. That would enable this country to be an exporter of gas when other countries were running out. This is a novel twist to the conventional wisdom that suggests that we should be running out of energy supplies. But it is not a crazy proposal. We could import competitively priced gas into the UK and re-export it to continental Europe. This is something which, long term, might be a good idea to look at.
	Because of the rundown of both coal-fired power stations and nuclear power stations—I apologise to the Liberal Democrats for using the "N" word, but that will be the only time—we shall almost certainly have to build more gas-fired power stations to cover until the new generation of electricity generating plants comes on stream. That could be, as we know, some 20 or 30 years hence.
	I know that the idea of building new gas-fired power stations is not great when it comes to carbon emissions but, in an interview with the Financial Times last week, the Secretary of State for Trade and Industry indicated that he proposes to boost gas storage. The measures are said to include changes to the planning guidelines to try to stop the nimby effect, whereby local objections would block multi-billion pound plans for new gas storage infrastructure. The Government are not actually suggesting that they are going to fund these projects; they are just suggesting that they will make it easier for the construction and engineering companies and so on to get on with it.
	Mr Darling is quoted as saying that security of supply is absolutely fundamental. This is really good news. I know that this solution does not greatly help the targets for reduction of carbon emissions, as I have said, but we are going to have to accept that we shall not be able to maintain electricity generation without an increase in gas utilisation to fill the gap. This is why it is so urgent to take decisions about planning now. The big question is whether the Government will be able to make the planning process easier for the construction of new pipelines, new terminals and new gas-fired power stations. That is the only way in which we can guarantee a crisis-free situation in our medium and long-term energy supply needs. I beg to move for Papers.

Lord Owen: My Lords, I am sure that we all congratulate the noble Baroness on her success in the ballot at a very appropriate time. I should first declare an interest as chairman of a company called Global Natural Energy plc, which has an investment in Corona Energy Ltd, a UK licensed gas distributor.
	The freeing up of the market in energy has been of tremendous help to this country: it has kept prices down, we have been highly competitive and it has been of tremendous help to industry generally over the past 10 years. It would be a great shame if, in panic, we lose sight of the advantages that we have had from that opening-up of market forces.
	Nevertheless, there are two lessons to learn from the very difficult experiences we went through in November and March. First, that there was insufficient storage capacity made available for us to be dependent on only one storage capacity at Rough was, quite frankly, dangerous. We should never be dependent on only one source and the sooner we start to look at that issue the better. Secondly, we were far too late in getting the Norwegian gas pipeline through. We should have seen the strategic interest. Here was a country, probably one of our closest friends and allies, that had been wanting to, and was ready to, supply gas to this country for well over a decade, and to take the length of time that we did in getting the gas pipeline was again extremely dangerous and rash.
	Fortunately, we have been able to catch up lost ground. The situation seems to be that, next winter, we will face a serious risk again unless we are lucky. After that, the situation improves substantially between 2007 and 2010, but we should be talking now about the danger of our inability to meet a really cold spell coming in 2013, 2014 or 2015. On present plans, looking at pipelines and storage facilities, we could face a serious problem in that sort of nine or 10-year timescale. I hope that we will anticipate that and that the Minister can give us some idea of what is happening.
	We should also clear our minds on one other issue. There is a belief that if we had somehow had more market forces operating in the European continent, gas would have flowed down the interconnector and made up much of our short supply. Frankly, that is not going to happen. Even if, as I strongly hope, we get a freer and more open market inside the European Union through its Commissioner for competition, the psychological attitude to energy supplies in Germany, France and Italy will not substantially change. If they will allow a free market in prices, we should not rely on them simply pushing more energy down the interconnector. The price incentive to do that through the interconnector in March was absolutely staggering, yet still it did not come.
	The answer is built into their attitude. Those countries are not prepared, at a time of cold spells, to let their gas supplies go to another country because they fear not having enough. That psychological attitude is already reflected in their having much larger storage capacity than ours, and that is not going to change completely. So, from the experience of watching this situation—with some concern over the last six months—I would urge your Lordships not to rely on a big change of attitude in the continent. I do not think that we will get the interconnector supply through.
	Can the Minister respond on one particularly interesting issue? I do not know enough about it, although other noble Lords might. There has been a recent announcement that Excelerate Energy—a rather good name for a company—has plans to import LNG at Teesside from December 2006, when we shall really need it, using on-board ship re-gasification technology. It will probably be only about 11 million cubic metres a day, but that might be very helpful. If that technology is available, should we not be encouraging some other companies?
	As I say, at present the prospects are that a cold 2006 will give us serious problems again. We should remember that, this time, we were able to reduce some of our gas supplies because some of the gas-fired power stations deliberately cut theirs. There was a good deal of sensible management to help those supplying factories or homes. Nevertheless, we were very tight in March and it could have been a lot worse. We could have had factories closed, layoffs in work and lost production. So the Government owe it to everybody to try and see if some short-term measures could be taken for next winter, and not just chance it out.
	I want to raise some aspects of the international situation. I suppose I should again declare an interest. In the past, I have had particularly long-standing interests in oil and gas in Russia. I hear again the voices—as in that rather stupid speech of Vice-President Cheney but, more than that, coming all the time—either trying to anticipate problems with our own energy policy, so as to rubbish gas and make people happier to have nuclear energy, which is a dangerous thing, or on the much more important overall attitude to Russia. We have heard a bit of that already, about Ukraine. First, before criticising the negotiations with Ukraine on gas, it would help to have an idea how long they had been going on and how difficult it had been for Gazprom to get the new Ukrainian Government to raise the ludicrously low price for gas. Russia is not a rich country. It has, at the moment, conducted its financial arrangements quite prudently; it has a substantial surplus of about $90 billion, which is about 10 per cent of its GDP, yet that indicates an extremely low GDP.
	There is a great danger, because it has done well out of energy and commodity prices, of seeing Russia as a rich country. It is not. It has serious poverty in many of its cities and it has a long way to go before it can build up its economy. Therefore it is wholly rational and reasonable that it will try and get full energy prices. We would all do exactly the same, and we should stop thinking there is something wrong in Russia trying to get more economic pricing.
	Politically, Russia handled Ukraine foolishly before the elections. I am very critical of all that. On the question of gas pricing I am less critical, however; we should look at it a little more realistically, particularly those of us who want market prices. There was a feeling that something about the situation was wholly political, but there is now ample evidence, from the way Russia is insisting on gas prices going up in Belarus, which is very close to it, to indicate that this is an overall policy. Russia is trying to maximise the return on its resources, and it is fully entitled to do so. We should be a little more cautious about that, and more understanding.
	Russia has gone through an immensely complex transition; what has happened through the 1990s since the fall of the Berlin Wall has been amazing. It has been a difficult but peaceful transition. I speak as a former chairman of Yukos International. I have lived through one of the most difficult issues, although I will not use the freedom of this House to talk about that. All I am saying is that I still have confidence in Russia, and still believe it can overcome some of these problems. It is seriously in our interest that it does so.
	The other day someone who ought to know better likened the new gas pipeline from St Petersburg to Germany to a rerun of the Molotov-Ribbentrop pact. The history is ludicrous, for a start, but this is the sort of hysteria we are starting to develop about Russia. It is in all our interests, wherever oil or gas is being taken out, to have multiple pipelines. It has been my view of the Caspian Sea that the more pipelines out, the better. It was unwise, to say the very least, for the European Union to be supplied only by two main gas pipelines coming over land.
	We may criticise Chancellor Schröder for too quickly going into business, although I personally do not. I think it is a thoroughly good thing. We all know he has an extremely good relationship with President Putin. The pipeline is an extremely important investment, largely financed out of German money. It needs to have as much clout behind it as possible to come out on time and at cost, and the sooner it comes through, the better. It is a strong British interest that the pipeline should be built. I hope we will not now have a ludicrous strategic argument that Russia is trying to do us all down by increasing its pipelines. It is thoroughly in our interest that that should happen. It is also in our interest that Russia develops more LNG exits for its gas, and that some of this will come out from the northern ports and go to the United States.
	We have heard about Algeria. If a cartel were to develop, it would be very worrying, but Russia is perfectly entitled, given the sort of pressures it is under, to act with other countries as the other oil-producing countries have been doing for decades. We just have to get used to the fact that Russia is now going to play its role in the world, and it has every right to do so.
	It must do so responsibly, however, and here I come to the question of the G8. The meeting being held is extremely important. We cannot lecture the Russians by saying they should not use the existence of these large gas fields as a political bargaining counter, when it is flagrantly obvious that the United States is using World Trade Organisation membership for Russia as exactly that. These are tough, proud, resilient people, and they will not go on being lectured to by Vice-President Cheney, or told by the Americans that they want such-and-such a demand in the energy field, only to find that they are being blocked from going into the WTO. I think there are only two countries at the moment stopping Russia entering the WTO, and the most important one is the USA.
	President Bush has had a mature view of how to handle Russia and has handled it extremely well. I wish the rest of his foreign policy had been conducted with the same degree of skill. Nevertheless, his role in the Petersburg summit becomes extremely important. I hope that we can see an opening up of these large gas fields in Russia to United States oil and gas companies which have substantial investment capacity behind them and, frankly, are much needed; that World Trade Organisation membership will be opened to Russia as soon as possible; and that Britain will play the role which we have done hitherto of treating Russia as a sensible partner in all these areas.
	That is not to say that there are not criticisms to be made: there are. From time to time where things have gone wrong, such as over Yukos, it is perfectly right that there should be strong criticism. Nevertheless, BP and TNK have a very good partnership. The tax liabilities on the oil and gas companies seem to have been sorted out in a way which should encourage future investment. There is no question or doubt: there is far more gas in Russia than has hitherto been stated. Because all the private oil companies do not want Gazprom to know that they have this gas they have been understating their gas supplies. It is perfectly reasonable that we treat Gazprom with respect, as a major world energy company. It was sensible for the Government to make it clear that there was not an automatic ban on any British gas distributor being open to offers in a world market by a Russian company. But, equally well, it gives us an entitlement to argue that there needs to be a more genuine open market within the European Union. If we achieve that, we shall be in a much better position to give lectures to Russia about its monopolies. I do not think that Russia will listen much to criticism over Gazprom while it sees that Gaz de France and Suez may, for example, be brought together in a very dangerous merger in terms of monopolies. I am glad that the European Commissioner is taking evidence on this and that Centrica has put in evidence against it.
	There are important lessons for our domestic supplies. First, we should act, if we can, even more imaginatively over the winter of 2006–07. We should be careful about, and anticipate now, the widening gap that is coming in 2013 and particularly 2014-15. We should do our utmost to get more out of the North Sea. The press talk as though we were not producing oil and gas. We are still producing a substantial amount of oil and gas out of the North Sea. The Chancellor should look again at his decision last November to raise the corporation tax on North Sea oil companies. If the price goes down, it will be a disincentive to getting it out. Over the next decade or 15 years, every extra amount of gas and oil from the North Sea is a bonus which we should try our utmost to get out.
	Finally, I hope that the Prime Minister will stop the nonsense where he seems to have to make a statement every day or week to grab headlines. He set up what was very necessary: what we thought was a serious study on energy policy. He pre-empts its findings in an absolutely ridiculous, juvenile way. We are fed up with this sort of government. If he wants to restore confidence in himself, he needs to relax, take it steadily, look at decisions over a longer term, and recognise that this energy review is crucial. All governments have usually got it wrong. We have got the nuclear question wrong, in particular the economics. There is no possibility of making sensible decisions on the nuclear issue without a realistic view of what the market will take and what it will finance. If they need a few extra months on the review, they should take the time—it is far more important to get it right—and not have any more pre-emption.

Lord Jenkin of Roding: My Lords, I join the noble Lord, Lord Owen, in thanking my noble friend Lady O'Cathain for resisting the temptation to abandon her balloted Motion. As she rightly said, we have had many energy debates in recent weeks, but that is hardly surprising. Energy is at the top of the agenda and it is right that this House should have regular opportunities to express its view. The noble Baroness took us on a tour d'horizon of the energy situation as regards how it affects the supplies of gas. I hope that the Minister will be able to answer her questions.
	I am delighted that the noble Lord, Lord Owen, has joined in the debate. Manifestly, he speaks from a deep knowledge of the subject. I am sure that all of us have benefited greatly from what he has said. I reacted, in particular, to two points. First, there is the hope that somehow there will be an early liberalisation of the markets in Europe. He has quite rightly said that the psychological attitude is very difficult. Recently, I have had the opportunity of talking to people in Kraftwerk Union (KWU) and in EDF Energy and they have endorsed that entirely. Another point is that in Germany much of the revenues that are based on oil and gas taxation accrue to the Lander and that is a very important aspect of their finances. Ofgem has been seeking liberalisation, and Commissioner Neelie Kroes is now pursuing it with commendable energy—she is a tough lady. However, the House must not be under any illusions: this will be a long time coming. The noble Lord, Lord Owen, was absolutely right about that.
	The Motion asks us to look at gas prices. My noble friend Lady O'Cathain described what has been happening. One can go back not more than three years to the malign impact of NETA—New Electricity Trading Arrangements—when Ofgem squeezed the price to the point where generators were being driven out of business. I remember the noble Lord, Lord Sainsbury, in a debate on British Energy, telling me that the trouble with British Energy was that it did not have a retail arm to bear its losses. Of course, many of the other generators did. So the effect of the low wholesale price of electricity at that time—much of it, of course, coming from gas—never fed through to the domestic customers at all and the domestic customers bore the costs of the losses on the generating side of the businesses. However, now that the wholesale price of oil and gas has risen very sharply, as both previous speakers have emphasised, that has been reflected in very sharp rises in prices for retail consumers and what has to be a sharp increase in fuel poverty.
	This debate is a good occasion to consider those problems. I would like to draw attention to the response by Ofgem to the consultation paper. A whole chapter addresses fuel poverty. I mention, in particular, paragraphs 5.12, 5.13 and 5.14, but I shall not read them out. That all seems to be very sensible; in fact, the whole of chapter 5 of the Ofgem response seems to be—I say this not always as an admirer of Ofgem; in the past I have been very critical of it—plumb right. I hope that the Government in their response and when they announce the results of their review will pay close attention. Ofgem does not support increasing prices to other consumers to bear the costs of helping those suffering fuel poverty. I think they are absolutely right in that. On a number of occasions, we have debated the way in which the ROC system—the renewables obligation certificate system—is not a subsidy paid by the Government, but a subsidy paid by all of us in our bills. We amended the Utilities Bill to say that that should appear on everyone's individual bill but in the other place the Government insisted on taking out the amendment.
	Ofgem has always been clear, and it says so clearly in its response, that the subsidies should fall on taxpayers generally. We have had some of that with the additional help to pensioners before the election and no additional help after the election, which has been widely seen as a cynical electoral ploy. But Ofgem also says, at paragraph 5.22 of the report that,
	"paying benefits in the form of vouchers so that they count as money off the fuel bill, rather than income, and therefore have a greater impact on the statistical measure of fuel poverty, simply adds to administration costs and consumer confusion".
	I hope that in their response to the consultation the Government will take close account of that. Ofgem's view is that consumers should pay the cost of the gas and electricity that they buy at the appropriate price and should not be subsidising other people through their bills.
	The second leg of my noble friend's Motion asks us to look at the implications of gas prices for energy policy. Here I listened to the noble Lord, Lord Owen, with huge interest. My views on nuclear energy are well known and I am delighted that the Prime Minister has joined the club. As I said the other day, he seems to have pre-empted the decision. I know that the Minister said that that was not so, so we have to wait and see, but I do not want to bore the House with further arguments in favour of nuclear energy.
	However, I will ask one question on nuclear policy. A number of us on this side of the House have had the advantage of recent discussions with some of the university people involved with the training of nuclear scientists and undertaking the research necessary to keep this country—as they sometimes say—an informed buyer. We need to spend more on fission nuclear research. There is a clear view on that point. They asked for a proper national nuclear laboratory, which is essentially a matter of providing facilities. Some investment is needed in fission nuclear research facilities that will keep us up to date. The core of that could be the BNFL company Nexia Solutions. By itself, there is wide recognition that that is not enough. There are a number of other bodies in the public sector and companies in the private sector that should be able to contribute to a proper national nuclear laboratory. I hope that the Minister will be able to say something about that matter.
	I turn to clean coal. I am being persuaded by a number of sources that for a variety of reasons producing gas, electricity and even hydrogen from clean coal processes must be part of the future policy for energy in this country. There is an enormous amount of research going on, some of which the Government have supported, but in that context I would like to draw the House's attention to a project that came to my attention at a recent meeting of the Parliamentary and Scientific Committee, a body that from time to time can produce some interesting information. This project is called Powerfuel. The Powerfuel project is intended in 2007 to reopen the Hatfield colliery near Doncaster. It is sometimes referred to as the Hatfield project. It will gain access to the huge 27 million tonne Barnsley seam, one of the thickest ever coal seams in this country at 2.5 metres thick, and it will mine that coal. It will build a 430 megawatt power plant using integrated gasification combined cycle technology (IGCC). That technology was referred to in the Government's consultation document but, as I have pointed out before, only in a footnote in an appendix. However, it represents the future.
	Hatfield colliery had to be mothballed two years ago. Some will know the promoter, Richard Budge, who was known originally as a very enterprising opencast coal producer who masterminded the buy out of British Coal in the mid-1990s. In the past few weeks he has done a deal with the second largest Russian coal company, Kuzbassrarezugol (KRU). That company deals not only with oil and gas but is huge in coal. KRU has now taken a 51 per cent share in Powerfuel plc. That is providing the funding to develop the power plant. The plant will be full carbon capture and storage, with a CO2 pipeline running along the railway line to the North Sea. Powerfuel aims to store the CO2 in the Brent oilfield. That will have the advantage of delaying the shutdown of Brent, perhaps by up to 15 years, and by using the CO2 for enhanced oil recovery will generate substantial revenues for the Treasury.
	The integrated gasification process creates 99.5 per cent pure hydrogen as the main driver for the generator. Of course, some hydrogen—perhaps up to 5 per cent—could be filtered off with little or no impact on generation. The projected cost of the electricity as it leaves the plant will be the same as current mainstream power prices, and that is calculated without taking any credit for the CO2 or for carbon credits. It will, of course, be significantly cheaper—up to a third of the cost—than current renewable sources. If you assume a credit for the CO2 used in enhanced oil recovery, the power becomes among the cheapest fuel sources in the UK. The promoters are satisfied that the technology will use market forces to raise the capital to replace the existing fleet of dirty coal-fired power stations with 100 per cent clean coal power stations—my next point will perhaps be of most interest to the noble Lord, Lord Sainsbury—without any financial help from the Government. It is not the same as the BP project at Peterhead in Scotland, where I understand that government support is being sought.
	I am told that Richard Budge and his colleagues are keeping the energy review team regularly in touch with the proposals as they develop. As I have said, they are looking not for financial help but for active encouragement to get ahead with this investment and—as so many other responses to the review have requested—for a clear, long-term structure for the energy industries and for a firm policy on carbon; a "contract for carbon", as I have called it in previous debates.
	The relevance of this to my noble friend's Motion is that the more we can secure UK resources to generate carbon free energy, the less we shall be dependent on high priced gas from overseas and the quicker we shall achieve our CO2 reduction targets. I hope that the Minister will give a fair wind to the Powerfuel project.

Lord Patten: My Lords, I am glad to follow my noble friend Lord Jenkin of Roding, who knows more about this subject—and has probably forgotten more about this subject—than I shall ever know. I greatly enjoyed his speech and I join him in thanking our noble friend for introducing this important debate. With due respect, it is unfortunate that there are no Back-Bench speakers from either the Liberal Party or the Labour Party. I was pleased to be present in the Chamber to hear the magisterial survey of the noble Lord, Lord Owen, speaking from the Cross Benches. I intend to speak a little less on the technicalities of gas and a bit more to the second part of my noble friend's Motion on the implications of our present risks regarding energy policy generally.
	I hope that when the energy review finally lands on the Prime Minister's desk he will consider machinery of government issues, because we urgently need a department of energy in this country. I have argued for that previously—we need a proper Secretary of State sitting at the Cabinet table, as we used to have, to discuss energy policy. That is the sole exception to my general view that machinery of government changes do not solve political problems. Political problems are solved by willpower, vision, determination and managerial grip—not machinery of government changes. That truth is starkly illustrated by the present apparent collapse of the Home Office, that once great department of state.
	By comparison, the Department of Trade and Industry, whose dismemberment and abolition would automatically flow from the setting up of a proper department of energy, is a comparatively innocent department, but is ineffective—as the National Audit Office's savaging of the Small Business Service two days ago has demonstrated. The DTI still needs six Ministers—a matter of continuous amazement to noble Lords on this side of the Chamber. If the department was no longer there, trade and industry functions could look after themselves, with a little help from the Foreign and Commonwealth Office and the Treasury.
	However, I do not believe that energy policy can look after itself. That area of policy has broadly been becalmed since 1997, with the DTI either refusing or not being allowed to square up to the serious risks that face our country, which have been outlined by my noble friend Lord Jenkin of Roding and by the noble Lord, Lord Owen, from the Cross Benches. Certainly, the department has not been allowed to square up to those serious risks until the Prime Minister, endlessly seeking legacy issues, sought to wind up the nuclear issue in pursuit of tomorrow's headlines, a point to which the noble Lord, Lord Owen, clearly referred.
	I do not use the overworked word, "crisis", but I do think that the risk to our energy supplies is at the highest possible security level, in terms of both the overall economic risks and terrorist risks. We have only to look at the European-wide spot electricity prices, which have risen by more than a half since 1 January this year. This looming problem has been glaringly obvious since the beginning of the decade. Some noble Lords may know that, with due modesty, there can be no greater satisfaction than reading one's words from a few years ago which then turn out to be true. With, I hope, properly restrained pleasure, I shall repeat my words in the debate on the gracious Speech on 27 November 2003. I said:
	"The risk is that there will be serious pressure on gas supplies in particular between 2005 and 2008. Our use of gas is growing at 4 per cent a year yet our UK production will begin to decline from 2005. There is a yawning gap afterwards. Unfortunately, it will not be before 2007 or 2008 that we shall have new, liquified natural gas terminals".—[Official Report, 27/11/03; col. 62.]
	I only wish that all of my predictions about the future had been so accurate. We now have further predictions, which the noble Lord, Lord Owen, has drawn to our attention, that we will face a vacuum in supply in the years 2012, 2013 and 2014.
	The noble Baroness, Lady O'Cathain, spoke with great authority on the gas issue. I shall not play any more little Lord Echo to her words. It is vital that an energy review comes out with a balanced energy policy, destroying that "either/or" approach, which makes gas, coal, nuclear or, indeed, alternative energy very fashionable.
	I speak with some past declared interest on renewables as a director of a pioneering renewable energy company between 1996 and 2004. It was called Energy Power Resources Ltd and was much derided, as many alternative energy companies were in the early days, but now much desired by larger players in the world. It was sold on to Macquarie Bank a year or so ago, showing how desirable such companies are. That company was involved with everything renewable, from wind to biomass and back again, which has given me a lot of technical background with which I shall not trouble your Lordships, save to say that I believe that renewables have an important and continuing role to play in energy policy in this country.
	However, having some technical knowledge allows one to spot a government cop-out or obfuscation. Let me cite one. The Government boast of their success in promoting co-firing—the burning of coal with biomass in our power stations to produce power and electricity, using coal and biomass materials such as straw or Miscanthus, or elephant grass as it is known colloquially. That is said by the Government to add to the diversity of supply. I say hear, hear, as it certainly does that. It is also said to add a great deal to the Government's green credentials towards meeting their stated objectives for 2010 and 2020 in their targets for renewables. It certainly does not do that.
	The noble Lord, Lord Sainsbury, revealed all in a Parliamentary Answer to me on the 11 May, which demonstrated that some two-thirds of the biomass utilised in co-firing in UK power stations is actually imported biomass. That does nothing for the Government's green credentials at all because a great deal of energy has been used in transporting that biomass material from different parts of the globe, and of course there is the risk that in the race to produce biomass in third countries, valuable agricultural land is used. That is much worse as logging and deforestation take place so that Miscanthus grass and so on can be produced and exported to this country. It is not a great help to the Government's green credentials to boast about the amount of biomass used in co-firing. I greatly prefer the approach to clean coal outlined by my noble friend Lord Jenkin of Roding.
	That is a little obfuscation but there is a much greater obfuscation which I hope the noble Lord, Lord Sainsbury, will deal with and give a direct answer to what I hope is a straightforward question. The Government have publicised much-vaunted figures for the use of renewables to be reached by 2010 and 2020. I simply cannot get a clear answer to this question. Are these figures, to be achieved by 2010 and 2020, targets—which if passed means success or if they are not met means failure—or are they aspirations? We need clarity of language and a straightforward answer to that question.
	At the other end of the spectrum from renewables, co-firing, biomass and Miscanthus grass is nuclear—the "N" word, to which my noble friend Lady O'Cathain referred earlier, and which is beginning to creep into this debate. I do not think that we can delay on this issue. I do not think that nuclear is some ideal form of power generation. All forms of power generation have their problems. They have their costs, inefficiencies and environmental impacts. But everything from biomass to nuclear and back again has its place in an integrated and balanced generation policy. Without the contribution of renewables and nuclear in the face of our dependence on politically volatile imported gas supplies from central Asia, north Africa or from the Middle East—I do no more than pause yet again on the terrorist threat at this stage—we shall be in deep trouble. I hope that my party—the Conservative Party—will, if necessary, help out the Government on this nuclear power issue. We helped them out last night on their Education and Inspections Bill, which walked up the Corridor for its First Reading here today. We have saved their bacon once; we may have to save their bacon for a second time on the nuclear issue. Just as on education, we may have to be Mr Blair's very best friend in this context.
	The new policies to be introduced by the Conservative Party under the feisty and forward-looking leadership of my honourable friend Mr Alan Duncan in another place will give us a great new approach to energy issues. I congratulate my noble friend once again on introducing the debate.

Lord Dixon-Smith: My Lords, I also congratulate my noble friend on introducing this debate. It is always remarkable how, when we start a debate on energy subjects, it moves from its initial direct focus. The debate has now become very significant, involving the whole international scene for energy, and it is clear that energy problems are not exclusively national. We have gone beyond the focus that my noble friend rightly puts in her Motion on the immediate gas problems and through the remarkable survey by the noble Lord, Lord Owen, of the international scene and his interesting contributions vis-à-vis Russia. I have some sympathy with the Russians. They have a huge short-term gain in energy but, in the long term, they may be vulnerable, as all major oil suppliers will find themselves to be. I was particularly interested in what the noble Lord had to say about how the nuclear issue is being handled in this country.
	From there we went to my noble friend Lord Jenkin, who is always fascinating. He warned us about what is likely to be the realpolitik of the approach of European nations to gas and fuel supplies. He gave us a particularly interesting detailed report on the Hatfield colliery proposals and the joint operation with KRU. Assuming that that all comes about, it will be extremely useful. This country is in some ways fortunately situated in that much of our electricity supply infrastructure is ancient and needs replacing. I understand that there is a problem with installing carbon-capture technology an add-on to existing power stations, so we are quite well situated if this technology comes on stream and works as it is supposed to do.
	From there we went to my noble friend Lord Patten, who interestingly introduced the very important point about the machinery of government. Although we have a Minister of State for Energy, he is within the department of the noble Lord, Lord Sainsbury, and has to work with every other government department. A while ago when I asked the noble Lord, Lord Bach, whether energy policy was driving carbon dioxide emissions or whether carbon dioxide emissions were driving energy policy, I could not get an answer. Perhaps the Minister will be able to give me an answer in his response, but his noble friend was unable to do so.
	I want to introduce yet another dimension to this issue, step back and have a look at the consequences of the great strategic issue of global warming which all countries have to face. The issue must eventually have a dramatic impact on the energy market. We are already beginning to see that. In its first year, the European emissions trading scheme has regrettably proved to be an almost complete failure due to the gross over-allocation of emissions certificates by our mainland colleagues. Eventually, however, the scheme must begin to have a major impact on the energy market. The problems of pollution caused specifically by carbon dioxide emissions are beginning to be priced back into the fuel. Ultimately, they will be priced back to the customer. We will be in quite difficult territory here for some time.
	We need to think for a moment about the Government's aspiration for a 60 per cent reduction in CO2 emissions by 2050. That seems a very long way away, and in the context of this debate, it is. There is an old saying about prophesy being an avoidable sin. I certainly do not seek to prophesy what will happen over the coming 45 years, but if that aspiration is real and if it becomes much more generally accepted internationally and not just accepted across the political spectrum in this country as it is now, then dramatic changes in the energy market will begin to come about. That implies that by 2050 the market in mineral hydrocarbons will be dramatically reduced from the level we are at present accustomed to. One of the consequences of that may well be at some point a dramatic reduction in the price of those mineral hydrocarbons in all their forms. That must be faced. So, those major international suppliers should enjoy their period in the sun.
	The responses to this sort of problem take many different perspectives and go into many different fields. One of the things that has fascinated me within the last week was to read a report in which a governor of a mid-western state said: "Gee, we produce 3 million or 4 million tonnes of wheat every year, which we export. We ought to be keeping that here and turning it into ethanol". American energy security and American energy demand will be met, and it will be met in very many ways. If that is one of the ways, then the impact of that decision—if it is taken by other states, and particularly if energy prices stay anywhere near where they are now—will have a dramatic effect on the world's food markets. The whole business of foreign aid and the whole spectrum of how we begin to feed ourselves will change dramatically. Indeed, my noble friend Lord Patten has already touched on that point in his description of imported biomass for coal-firing.
	Later today we will debate a Private Member's Bill on energy, which will very much deal with micro-generation. There is a great deal in that Bill about the use of biomass, biofuels and so on. However, all those systems use land. Mankind generally and not just in this country will have to work out how to balance our energy demand with our need for food. That will have a very serious impact indeed.
	I do not begin to know how the balance between these various factors will be worked out. What I do know is that it will engross all of us more and more over the coming years. I hope that it will not be too much of a battle of party-political infighting except inevitably, of course, over the day-to-day detail. This is a global problem that has to be faced. It must have an impact on what we are discussing today, albeit the problems that we are discussing today are essentially short term in their nature. We need to keep this issue in the back of our minds but also recognise its strategic implications.
	The issue will have a major impact on investment policy. If there is ultimately to be a reduction in what I call the mineral hydrocarbons supply side, then it will begin to have major financial implications because people will begin to wonder whether the return on investment will be there and so on. So there are very important background issues that will need to be watched. Whoever is in charge of this policy will certainly have an interesting and difficult time.

Lord De Mauley: My Lords, like other noble Lords I warmly congratulate my noble friend Lady O'Cathain on giving us the opportunity for this very useful debate today. The recent drastic increases in the price of gas are at least in part as a result of rising demand, the end of just over a decade of energy self-sufficiency, dramatic increases in the price of other energy sources such as oil and coal, and the introduction of significant environmental measures. These have been compounded by inefficiencies in European Union energy markets, some of which have not liberalised adequately, and by delays in the provision of new gas import infrastructure resulting from the time taken to secure approvals through the British land use planning system. The result has been not only rising gas prices for consumers but also high electricity prices, as more than one-third of our electricity comes from gas-fired power stations. This is the aspect on which I propose to focus.
	Alongside the alarm over rapid price rises, there has been, during the winter just ended, concern over the short-term security of our energy supplies. This has been exacerbated by events such as those between Russia and the Ukraine and by the fire at Milton Keynes. Many of the underlying challenges will remain over the longer term, but increased by the need to replace one-third of our generating capacity by 2020, by which date we could be importing 80 per cent or more of our gas needs, and also by the risk of a terrorist incident or a failure of emergency planning, and by the Government's goal of a 60 per cent reduction of carbon emissions by 2050.
	The Government's 2003 energy White Paper sought to set out how some of these challenges might be addressed but it has been found wanting at least in the following areas. First, energy prices have already significantly exceeded the Government's projections for increases in prices by 2020. Secondly, the White Paper did not analyse in sufficient depth the implications of a shift towards large volumes of imported gas or the need to retain some flexible coal plant to provide reserves alongside an increasing proportion of largely intermittent renewable generation. Thirdly, the White Paper relied on very substantial energy efficiency gains and a major expansion of renewables to achieve the climate change objectives.
	A more effective government strategy is urgently needed. However, to change direction dramatically would only introduce new uncertainties, undermining commercial decisions taken in the past two years and increasing the degree of perceived political risk and hence the cost of future private sector investment in United Kingdom energy markets.
	A more effective strategy does not mean abandoning a market-based approach to meeting our country's energy needs. A well functioning market remains essential to ensuring responsiveness to changing circumstances and to ensuring that prices can be set as efficiently as possible. The aim should be to enable market players to manage these sorts of risks better by removing the obstacles that currently prevent them from doing so. Nor should this be seen as an excuse for greater intervention in general by government, but as a better way of exercising responsibilities where government already has a legitimate role; for example, in foreign and fiscal policy, the use of target-based economic instruments, and by granting planning approval for energy infrastructure.
	As I have said in your Lordships' House before, the Government need to act now in the following areas. They must work to minimise the regulatory risk which is discouraging investors from investing. The billions of pounds of new investment needed by 2010 must come from investors who are looking for commercial returns. A major deterrent for them is the lack of clarity in the policy framework and the risk of inappropriate government intervention. United Kingdom continental shelf production has peaked but there are still substantial opportunities to develop new gas production. To maximise the potential of that, the Government must avoid further precipitous changes to the fiscal regime. If the current rate of investment can be sustained, the United Kingdom could still be producing 25 per cent of its gas needs from the UK continental shelf in 2020. But if investment levels fall, the consequent degradation in infrastructure could dramatically reduce its contribution by that date.
	A further problem is that the framework for the pricing of carbon emissions under the European Union emissions trading scheme expires in 2012, which leaves the potential investor in plant—which after all will not come on stream until the middle of the next decade—without the key economic data that he needs to evaluate a project. The Government must promote a diversification of the energy sources we rely on, foster a wider range of renewable and low-carbon technology, and encourage an increase in energy research and development investment.
	We need to achieve greater energy efficiency. We also need to increase the take-up of low and lower carbon power generation. This should come from a wide range of different technologies to spread the risks, perhaps including a combination of nuclear, renewables, combined heat and power, clean coal and carbon capture and storage. There is a serious risk that government ends up selecting technologies that turn out not to be commercially viable without greater levels of subsidy than other technologies which are just as environmentally sound.
	European Union member states are required by various directives to liberalise their energy markets but, in some, political resistance is hindering implementation. In its dealings with the European Union the Government must prioritise energy market liberalisation. If other European Union countries remain behind us, as we rely increasingly on gas imports, we risk facing continually higher gas and therefore electricity prices than our neighbours.
	The Government must help make the economy more resilient to price rises by fostering increased efficiency of energy use. They must quickly streamline the process for determining planning applications for energy infrastructure projects and dramatically increasing fuel storage capacity. They must also promote stronger research, development and training to develop the engineering skills base for the energy industry.
	Our domestic strategy must be coupled with a diplomatic strategy. In future we are bound to rely more heavily on foreign supplies both from within and beyond the European Union. We therefore need to promote democracy and the principles of the market economy on an international basis. We must also develop diverse supply networks, to reduce reliance on supplies from troubled regions. Without taking those steps we are heading for serious problems, if not disaster. I hope that the Minister will be able to reassure your Lordships that all these matters are being dealt with by the energy review.

Lord Redesdale: My Lords, I thank the noble Baroness, Lady O'Cathain, for initiating the debate. The great joy of being in one of the winding-up positions is that an issue so specifically focused on one area is often covered, as it was in this case, especially by the excellent speech of the noble Lord, Lord De Mauley. I will be able to cut large sections out of my speech, which at this time of the day will be helpful.
	I would like to raise a point mentioned by the noble Lord, Lord Patten. The fact that there are no Back-Bench speeches from either our Benches or the Government Benches is probably due to the failure of debates being moved to a Thursday. As every Front-Bencher knows—or anybody who has initiated a debate on a Thursday—you can often strong-arm your friends to come and speak in your debate, but it is very difficult to get anybody else to turn up when the weekend beckons. As the phrase went in the Army, Wednesdays are a terrible waste of two awfully good weekends.
	I will start with a question. I hope that the Minister will not think I am being facetious, but I was amazed by a number of rumours spreading yesterday about meetings being held in the DTI, where people were being called in to discuss whether there was a real issue of us running out of gas capacity in the coming winter. I would be grateful if the Minister could answer that. He might not know right now, but it would be helpful if he could write to us.
	I found that an interesting rumour when I was preparing for this debate. Obviously we have had many problems over the past year. As the noble Baroness, Lady O'Cathain, pointed out, some were unfortunate, such as the fire at Rough, and others were due to matters beyond our control, such as the problems with the supply coming through from Russia. I thought that the excellent speech of the noble Lord, Lord Owen, was very instructive. The reports all give a very cynical view of the Russian attitude and it is useful to have a positive aspect as to why it undertook its actions. As we will become reliant to a large degree on Russian gas, any moves to control the flow of that gas into the market has to be a major worry and will have a major impact on the price—as was shown at the time, with the prices rising to a record high.
	I know that the Minister will say that a number of the issues that have been discussed over the past year are being addressed. I was gratified to see that National Grid has announced that £9 billion is to be spent on dealing with imported gas and the connection of renewable wind resources to the national grid. We should not miss one of the problems with the price indication of gas. Gas prices have been remarkably low for a number of years. Many people can afford even 25 per cent rises without noticing them too much. However, there is a real problem with fuel poverty in the country, and that is something we should address.
	I hope that the Government will look at talking to Ofgem, the regulator, about tariff systems that would reflect the use of gas. Knowing that fuel poverty is a real issue, lifetime tariffs—as they are called—give out an amount of gas at a low price. However, any excessive use of gas over and above the normal use of gas attracts a significantly higher price. That is an interesting solution to one of the problems we have at the moment. The cost and wastage of fuel is directly indicative of the income of those who use the fuel. Larger properties waste proportionally more fuel through heat loss than smaller properties, because they can afford to do so.
	We have discussed the issue of gas prices, which is mainly to do with the spike that came about, I believe—and as is now becoming widely accepted—due to the illiberalisation of the European gas market. It seems ridiculous that there was gas in Europe ready to be pumped but it was not coming to us. I was quite shocked that research done by Global Insight has shown that failure to liberalise continental energy markets will expose the UK economy to an extra £10 billion in costs in 2006. We should take that issue extremely seriously.
	When we had a debate on that very issue, we called on the Government to do something with the European Commission. I see from newspaper reports of last week that the offices of E.ON, RWE, Gaz de France and several other dominant European energy groups were raided under the Commission's anti-trust probe. That is a useful step forward, which will tackle some of the problems. However, the issue is much more fundamental than that. That is to a large degree due to the nature of the industry in Europe.
	There seems to be a consolidation of the European gas market, which flies in the face of an open and liberalised economy. Of particular concern are some mergers proposed at present. They would send up gas prices because we will end up with such large groupings as are being combated by the anti-trust probe. To give an example, the proposed merger between Gaz de France and Suez in France will do nothing to liberalise the market. There is also a mooted merger between Enel and Eni in Italy and a hostile bid for Endesa in Spain by a German national company. All of those are of real concern if we want reduced gas prices. I hope that the Government will support moves by the European Commission to block the proposed merger between GdF and Suez because, if it goes through, gas liberalisation will be ever more difficult to achieve.
	One way to deal with the price of gas is to introduce competition in the electricity market. I have a couple of questions about the energy review. It was suggested that the energy review would be published in the summer; we have heard that term a number of times before, and the parliamentary summer seems to end around November. Can the Minister give us a clearer indication of when the energy review will be published? To be cynical, the comments of the Prime Minister might suggest that the outcome of the review has already been stated. I noted that the noble Lord, Lord Jenkin, was especially gratified to hear the words of the Prime Minister. I very much hope that the review will be published in full; that there will be a chance to debate its outcome; and that we cannot just take it as read that nuclear will be an option.
	We on these Benches do not agree with nuclear power for many reasons. One of the main ones is cost. The noble Lord, Lord Jenkin, raised the issue of clean coal and how cheap it could be, and the fact that renewables are open to subsidy, which I very much support. Nuclear power, which was to be too cheap to meter, has proved far from being so and has received massive government subsidy over the years. I am especially concerned by the proposal from energy companies, raised by EdF, to build nuclear power stations for free if they could set the tariff limit for electricity over a very long period. If we are to enter that negotiation, talking about gas prices is somewhat secondary because we are already rigging the electricity market for the next 30 to 50 years.
	Other areas will be covered in the energy review. I was keen to hear about clean coal. I know that my noble friend Lord Ezra has raised that issue many times; he apologises for not being able to be with us. It is a feasible technology that needs investment. Carbon storage and capture is one way that we could combat climate change.
	We need to consider diversification of the energy market. There is no silver bullet. That is another problem that I have with the nuclear debate. We often discuss nuclear power in this Chamber as if it is the only option and excludes any other possibility. I do not believe that nuclear is the final word in electricity. It will deal with only a small proportion, unless the Government heed the words of the Chief Scientific Adviser and discuss building eight to 10 nuclear power stations. Then a significant proportion of our energy would come from nuclear power. However, as the energy review has not yet been published, I do not know whether the Government have any figures for the number of nuclear power stations that they would consider.
	The noble Lord, Lord Patten, mentioned co-firing, and I very much welcome his words. I believe that co-firing has a place. I have been considering the Drax power station and carbon reduction from using co-firing methods. However, the Drax calculation—this backs up what the noble Lord said—is that there is no point in undertaking co-firing if you have to bring the source material from further than 40 miles away. If it is further than that, you are using more carbon in transportation and production than you are saving by co-firing.
	Another area that would be advantageous to consider in future, which is hardly ever mentioned, and which, although it has been around for a long time, has recently made significant strides—I hope that we can have a debate on it in future—is energy storage, the storage of electricity. Some massive advances have been made in its technology. Although it is not quite financially feasible yet, I believe that it will become feasible in the very near future and will help to smooth the spike in the grid that takes place so regularly.
	I conclude by welcoming the Bill to be debated this afternoon. I am especially disappointed that I shall not be able to take part. It originally initiated in this House as a Private Member's Bill, the Renewable Energy Bill, which I introduced a year ago, and was then introduced to the Commons as a balloted Bill. I welcome the efforts that the Government have made to use that Bill and add many more clauses to further the renewable energy debate. The Government are to be congratulated on that. However, as I shall not be around this afternoon, perhaps I may ask the Minister to write to me. The Bill raises the issue of dynamic demand, which concerns electricity supply, so it is not quite outside this debate. The DTI is under an obligation to supply funding for research into dynamic demand. However, those pursuing dynamic demand have had problems over where that funding is to come from within the DTI. I hope that the Minister can look at breaking that deadlock.

Baroness Miller of Hendon: My Lords, I join other noble Lords in congratulating my noble friend—in every sense of that word—Lady O'Cathain on having initiated this timely debate so comprehensively at a time when the whole long-term energy supply situation is back on the agenda.
	The Prime Minister has pre-empted the Government's long-drawn-out energy review by acknowledging that nuclear energy is indeed a necessary ingredient in the nation's energy mix. My party's energy review is still proceeding, and I cannot comment on its possible conclusions.
	Before I speak about gas, which is the main topic, I must say that the excellent debate initiated by my noble friend prompted the noble Lord, Lord Owen, to speak extremely well and comprehensively on this subject—without, I noticed, even a single note. He will have heard many people say how many times we have had a debate of this kind, so I hope he will not think it presumptuous of me to say that I hope he will speak again and again when these debates come up.
	To return to the beginning of the debate, the Government have embraced gas so enthusiastically that their recent policy has been to put practically all our energy requirements into the gas basket. Another important thing that we have tried to prompt them to do is to deal with clean coal technology, which the noble Lord, Lord Ezra, would mention if he were here; he has done so many times before. I was most impressed by what my noble friend Lord Jenkin said about the Hatfield project; I think that he called it a "power fuel" project. I hope he will forgive me if I do not comment any further on it, because I think we need to read Hansard in depth and in detail, and many times, to get the full flavour of what he was saying.
	It is planned that 60 per cent of our energy mix will rely on gas and, as the DTI admits, 90 per cent of that will be imported. By ignoring supplies from other viable sources and making ourselves almost entirely dependent on imported gas, we can be sure that suppliers will take advantage of our possible commercial weaknesses. In 1972-73, OPEC used its monopoly powers to cause worldwide economic chaos by imposing an arbitrary and swingeing increase in oil prices in support of its geopolitical policies. President Chavez of Venezuela is currently rattling the doubled-edged sword of nationalisation and diversion of supplies as part, I suppose, of his anti-USA policy. It is perhaps trite to remind your Lordships that those who do not learn from history are doomed to repeat it. The fact is that the vast proportion of our fuel supplies in the form of both oil and natural gas will be coming from these regimes, some of which are far from stable. Those sources may not be our enemies, but they may not be our friends, either—or, if they are, the events that I have just described make it clear that they are our friends not through thick and thin, but only until it suits them better.
	We receive our gas largely along pipelines that are prone to terrorist attack, as my honourable friend the shadow Foreign Secretary reminded us in his thoughtful article in this week's Sunday Telegraph. As my noble friend Lord Patten said again today, it is ironic that the green lobby often raises the scare of nuclear plants being prone to terrorist attack—this, of course, has never happened—when pipelines, especially in Iraq, are attacked almost daily. Apart from the danger of terrorism, large quantities of gas will reach us along pipelines and an interconnector that can be manipulated by operators in Europe, who have already demonstrated a failure to ensure that the UK receives fair access to supplies. Indeed, many noble Lords have made exactly the same point.
	Russia's monopolistic gas producer has threatened to divert its supplies if its attempt to establish a hold on gas distribution—and hence possibly on prices—in the EU and in the UK in particular is thwarted. Centrica has warned the European Commission that the proposed merger of Gaz de France and Suez threatens gas supplies to Britain and is almost certain to drive up prices, as it would be an end to effective competition in the UK gas market. The noble Lord, Lord Redesdale, made that point, and my noble friend Lady O'Cathain pointed out that the noble Lord, Lord Davies of Oldham, had made several statements to the noble Lord, Lord Ezra, about the Chancellor of the Exchequer and the Secretary of State for Trade and Industry writing to the European Commission on this very point.
	The proportion of our energy needs that will be met by gas depends totally on how quickly other sources are developed and expanded. In the mean time, the United Kingdom is woefully short of storage facilities. The noble Lord, Lord Owen, was one of the first, in his excellent speech, to mention the storage problem. Under the stewardship of the present Government, our natural gas supplies have been gobbled up, perhaps to the delight of the Treasury, which enjoys more revenue from gas than do the producers. Yet, as the Government have just admitted in a written ministerial Statement, the failure to help to facilitate the gas supply infrastructure, especially the storage facilities, will immediately, or over time, create difficulties in balancing supply and demand, thus reducing the reliability of our energy supply arrangements.
	The UK currently depends for its imported gas supplies on the "just-in-time" delivery system, exposing us to shortages in availability from abroad. Instead of planning ahead, and encouraging the industry to do the same, the Government have complacently opted to do nothing, until finally waking up to the problem at five past midnight. In contrast with many European countries, whose markets depend on imports of gas and which have constructed strategic storage facilities of up to 80 days, we in the UK have just one week's supply, and all that the Government can offer is the hope that,
	"current projects have the potential to make a real difference . . . by 2010".
	That is truly, "Jam tomorrow". But at least the Government are offering to try to facilitate the construction of urgently needed storage facilities by,
	"a review of the onshore consents regimes . . . and streamlining of procedures".
	Although we welcome this initiative, it is, I suspect, easier said than done, as other noble Lords have said.
	In the mean time, the DTI acknowledges that domestic gas prices have risen by 60 per cent in the past three years. As my noble friend said, that is 30 per cent higher than in the rest of Europe. More than that, industrial gas and electricity prices have tripled in the UK in the same period and are now the most expensive in Europe. The DTI has also admitted that the climate change levy has increased the average price of gas by 3.5 per cent.
	Because of the high proportion of overheads contained in fuel costs, the price increases on industry, coupled with the threat of unreliability of supplies, last winter caused the loss of 6,000 jobs in the glass industry, some of which will be permanent, an 80 per cent reduction in brick-making capacity, and a permanent reduction in the production of chlorine and ammonia-based fertilisers. Those are just a few examples. In other words, the vastly increased cost of gas in the UK compared with that paid by our overseas competitors is having a dire effect on both industry and employment.
	The effect on the entire economy and the balance of payments will be disastrous when the vast preponderance of our energy has to be imported to meet our needs. We have all repeated this warning in several debates, but have not had much response from the Government. That, in a way, is because it is totally unanswerable. More than that, the lack of adequate strategic storage facilities puts us at the mercy of the daily fluctuations of the market—oil has now reached $67 a barrel—and the vagaries of the weather. We are also at the mercy of speculators, saboteurs and industrial accidents such as the fire at the Rough storage facility in the North Sea. We could also be at the mercy of malign overseas regimes.
	It is to be hoped that the Government's much delayed energy review will provide much needed answers to our problems. I trust that the completed review will be followed by the swift action that is needed, and will not again be kicked into touch by further consultations and the dithering that has been a feature of Government policy since their last White Paper was published. As my noble friend Lord De Mauley said, it is no good continuing to have consultation after consultation. At some stage, a decision has to be taken so that industry has the confidence to invest in many of these technologies. The Government have made it quite clear that they are not waiting to invest money, particularly in nuclear energy, but are expecting investors to do that. Investors need certainty before they take those decisions.

Lord Sainsbury of Turville: First, I congratulate the noble Baroness on securing this debate. Energy prices are clearly an extremely important issue, both for British industry and for British consumers, and I welcome this opportunity to put forward the Government's position.
	As the noble Baroness and other noble Lords have so clearly outlined, we have recently seen significant increases in energy prices, which have impacted particularly on industrial consumers and the fuel poor. Domestic gas prices have risen by 35 per cent between March 2004 and March 2006, while domestic electricity prices have increased by 26 per cent. Industrial gas prices have more than doubled over the same period, while industrial electricity prices have almost doubled.
	Most prices in the UK have increased in percentage terms by more than those in France or Germany. However, for domestic prices, we still remain below prices in those countries in absolute terms and below the EU15 median prices, and our industrial prices are still around those in Germany, even after the increases. We have to ask why we have seen a position that is worse than those in most other European countries, even though in some cases that has only brought us level with them or slightly higher.
	Gas prices have been rising as a result of a tightening in the supply/demand balance as supplies from the North Sea decline and we become increasingly dependent on imported gas. We are in transition from a situation where net imports currently account for less than 10 per cent of annual gas demand to one where in 2010 a third of demand will be met from imports—in 2020, the proportion will be 80 per cent or more. To some extent, gas prices still follow oil prices, which have also been rising.
	Electricity prices are rising as well, partly as a result of increasing wholesale gas prices. However, there are other factors involved, including higher international coal prices, the recovery of wholesale electricity prices from unsustainably low levels, and the introduction of the EU Emissions Trading Scheme in 2005. The Government are well aware of the problems that higher energy prices create for the competitiveness of industry. That is why we have been working, and will continue to work, closely with industry and others to limit the impact of these price increases.
	Our discussions with the Energy Intensive Users Group and other groups have helped us to focus our efforts on maximising gas and electricity supplies, improving the operation of the market, encouraging demand-side response and pursuing fair access to markets across Europe. Over the summer, we will be pursuing a detailed work plan with Ofgem, National Grid, industry and others to ensure that we are in the best possible position ahead of next winter. In answer to the question put by the noble Baroness, Lady O'Cathain, we are doing everything that we can to help energy suppliers to get planning permission for storage facilities.
	Just last week, Alistair Darling announced the formation of a new Business Energy Forum to be co-chaired by Malcolm Wicks, the Minister for Energy, and Richard Lambert, the new Director-General of the CBI. This group will provide a high-level forum for discussion of a broad range of strategic energy issues, with an initial focus on security of supply for next winter. Ofgem has also recently published National Grid's "Winter Outlook" consultation for the coming winter. This gives a detailed assessment of the supply/demand prospects and seeks views to help the market to prepare for next winter. We have also been supporting the European Commission in its efforts to enforce the energy liberalisation legislation and to investigate the operation of energy markets across the EU. We therefore welcome the dawn raids on the offices of utility companies in five member states on 17 May.
	To look ahead to next winter, gas supplies are again likely to be tight, maintaining pressure on prices. However, the market is responding to this challenge. For the coming winter, four major import projects are under construction and, looking beyond this winter, the market is already seeking to deliver some £10 billion of major gas supply infrastructure projects by 2010. If all these projects obtain planning consent and progress to schedule, we could more than double our storage capacity and more than triple our import capacity by 2010, helping to reduce upward pressure on UK gas and electricity prices. Looking further ahead than that becomes difficult, because one would not expect the projects that will cover the situation after this to be coming through yet.
	These new projects should provide the UK with important additional flexible sources of gas supply to meet winter peak demand. The Government are working on a comprehensive three-point programme to help these and future gas supply projects proceed: legislation, when parliamentary time permits, to establish a regime for the storage of gas in salt caverns offshore; a review of the onshore consents regimes; and a public information programme.
	I would like to say a word about why we are in this situation with the gas storage infrastructure. We would not have expected to have had this storage during the period when we were a major energy producer. Therefore, comparisons with other countries that have much greater gas storage are not sensible, because when you are a major producer you can cover the swings in demand from swings in demand on the producing side. Where there has been a failure—and it has to be said that this is mainly the responsibility of industry—it has been in predicting how rapidly we were moving from being a producer to importing. That has happened rather more quickly than people had expected and, on the other side, it has taken longer to get the storage facilities in place, which is why we have this short-term problem.
	Noble Lords may be aware of the parliamentary Statement of need for additional gas supply infrastructure that was tabled in another place last week. It sets out clearly the fact that we need the right gas supply infrastructure in place to help us to manage this increasing dependence on gas imports. We need a planning consents regime that enables timely consent decisions and helps to balance the need of local residents with the national need for reliable gas supplies. The Government will be working hard on this point.
	We recognise that energy-intensive industries—such as the chemicals, metals, glass, paper and construction sectors—have been particularly hard hit by the rapid increase in gas prices. Clearly, the rise in energy prices is also having an impact on the figures for fuel poverty. Analysis suggests that the total number of vulnerable households in fuel poverty is likely to rise by around 1 million in England between 2003 and 2006. That is why the Government have increased the funding to fuel poverty programmes, which help the most vulnerable in society to lower their energy bills. We are making available an additional £300 million in the period 2005 to 2008 to provide heating and insulation measures to vulnerable households. The Government have also pledged to continue winter fuel payments for the length of this Parliament.
	In the short term, we have taken all the actions that we can to protect industry and consumers from these price increases. However, the rapid increase in prices emphasises the difficulty of predicting price changes and technological developments in the energy industry. This in turn emphasises the value of maintaining a diverse range of energy sources and the desirability of having the flexibility to switch between them. In her opening speech, the noble Baroness quite rightly raised the question of the implications of these gas price increases. It is clear to me that they point to the desirability of having a diverse range of sources of energy and of having the flexibility to move between these. My generation has for 40 years heard people predicting what will happen with different sources, and the only constant factor is that those predictions have been consistently wrong. Therefore, the argument is to have a robust and flexible system.
	There are two other implications for energy policy that I believe we can draw from the current situation. First, we should not see energy policy as a battle between energy sources. It should not be seen as a beauty contest between coal, oil, gas, nuclear, combined heat and power and renewables, with supporters cheering on their favourite energy source. I was delighted to find a point of agreement with the noble Lord, Lord Patten, that this really is the key issue. To have these battles, where people say that the solution to all our problems is tidal or wind or nuclear, is the one thing that is obviously wrong. Almost certainly, the best energy policy at any one time is likely to involve a mix of energy sources. Energy efficiency must also be a priority for us.
	Secondly, it is essential—and here I agree with the noble Lord, Lord De Mauley—that we maintain a strong research and development energy programme so that we can rebalance our portfolio of energy sources over time in response to technological and price changes. These are the sort of points that will be picked up in the energy review, which will consider both how we can achieve our three objectives of energy security, sustainability and lowest cost to the consumer, and how we can create a robust and flexible system of supply.
	I shall now address a number of other major points raised by noble Lords in the debate. The noble Baroness, Lady O'Cathain, asked who is running the energy review, and the answer is that it is the DTI. As I explained earlier in the week, what the Prime Minister said at the CBI dinner is what he said last year. One may query whether it is sensible to go on saying the same things every year to the CBI. I always find the Prime Minister's speeches inspiring, but I have to say that this particular speech seemed to me a statement of the blindingly obvious. If people do not understand that nuclear energy, renewables and energy efficiency are high on our agenda, particularly during the period in which we are moving from being a producer of gas to an importer, they have not been paying attention to the debate. These are absolutely obvious issues and ones that will be considered in the energy review.
	As always, I agree with much of what the noble Lord, Lord Owen, has said. I agree strongly with him about the benefits of a market-oriented energy policy and that, in future, geopolitics will become an increasingly major issue in relation to energy. If we think that in the future there will be a free market around the world in energy, we have lost the plot, as my children would say. The fact is that geopolitics will become more important. While the importance of a liberal market in Europe is clear, we must make a distinction between on the one hand liberal markets and on the other hand people and countries taking policy decisions that they need to have a certain amount of gas storage and therefore buying on long-term contracts to secure supply. That is not anti-competitive; rather, it is simply a sensible decision. We need to be clear on what basis we are buying gas in the market. It is to be certain that we take the long-term view and put a proper weight on security.
	What are the implications of this? I believe strongly that there is no point in expecting countries to behave in an idealistic way. Again, an appropriate response to an increased amount of geopolitical interference in energy markets is to have diversified sources. I also agree with the noble Lord, Lord Owen, that the short lead-time LNG import project using the very innovative US technology of on-ship regasification now taking place on Teesside is extremely important. If it is successful, it is something to be expanded in the future.
	In response to the noble Lord, Lord Jenkin, we welcome the plans to reopen and reaccess the indigenous coal reserves at Hatfield and to initiate the construction of a planned 430-megawatt carbon and hydrogen capture-ready integrated gasification combined cycle power plant adjacent to the mine. It is a highly desirable and entrepreneurial project and we would be happy to give it our active encouragement if under scrutiny it is as valuable as it looks at first sight.
	The noble Lord, Lord Patten, asked whether the renewables figures that we have given for 2010 and 2020 are targets. They are clear targets, but it is not entirely within the hands of government to produce them, because they depend on whether people come forward with projects. However, it should be remembered that we now have, either with agreement or in the planning process, more than enough projects to achieve the 2010 target. If we do not reach the 10 per cent target, that would not be because it is impossible physically to do so or that there are engineering reasons against it; it would be simply because we could not get agreement within the planning system to move fast enough. I should also say to the noble Lord that I have never heard anyone propose a change in the machinery of government without first prefacing their remarks with the comment that they do not believe that the machinery of government changes or alters anything. People maintain that the machinery of government is bad for everyone else, except for their own particular project. As elsewhere, this is about getting the policies right, which is what we will do with the energy review.
	The noble Lord, Lord Dixon-Smith, clearly indicated that there will be huge technological and price changes in this market and that many factors can affect it. Again, that makes the case for diversity. I agree also with the noble Lord, Lord De Mauley, about diversity. We are not in the business of picking technologies. We are in the business of making the market for energy work, although it is right and proper that we should, when considering the environmental impact, provide incentives for people to produce energy that does not have an undesirable effect on the environment.
	The noble Lord, Lord Redesdale, asked whether meetings have been taking place about the supply of gas over next winter. Of course such meetings have been taking place. Ofgem has just produced a paper on the outlook for 2006–07, we have published a Statement on the need for infrastructure, and discussions are taking place. If such things were not being done, I am sure that the Opposition parties would even now be saying that that showed a dangerous complacency on the part of the Government. The noble Lord can be certain that we are holding meetings and that there is nothing sinister about that; it simply reflects a modicum of competence.
	I stress the point that, while we welcome competition, we should not confuse competition with people, companies or countries making long-term supply agreements, because that is about security, which is extremely important. I agree that in the DTI summer normally comes to an end in December, but in this case the energy review will be produced in July; we are clearly committed to that. I should also say that the review will take a very clear market approach and that it will be for energy companies to take investment decisions whichever the energy source concerned, although, as I have said, we always need to consider whether it is appropriate to provide incentives that push people in particular directions. I also make the point to the noble Lord, Lord Redesdale, that if you do not believe that there is a silver bullet, you have to ask why you would then want to get rid of some of the other bullets so that you had to rely on just one of them—renewables—to deal with this problem. On dynamic demand, I shall write in response to the question he asked.
	The noble Baroness, Lady Miller, also made the case for diversity and reminded us about dealings with OPEC. It is my view that the situation will be worse in the future. It used to be a question of OPEC versus the western countries, which usually had a common interest. We are now moving into a world where Russia is using energy as part of a geopolitical situation and China is coming into the market with huge and voracious energy needs. Given that, we cannot see this as a world other than one that will be dominated by geopolitics. We need to make certain that our policy takes account of that and we recognise that energy security plays a key part.
	In conclusion, over the past two years gas prices have risen significantly, which has had serious implications for the competitiveness of UK industry and for fuel poverty. Supplies of gas next winter will be tight and it is likely that the pressure on prices, in particular winter prices, will continue. New gas infrastructure is coming on line which will significantly strengthen our import infrastructure over the next couple of years, doubling our storage capacity by 2012. In the short term, we need to take steps to move through our transition from a gas producer to a country that imports 80 to 90 per cent of its needs. In the longer term, the energy review will help us to create a robust system of energy supply that is flexible enough to switch between energy sources. Also in the future, geopolitics are likely to play an increasing role in energy supply, so we cannot afford to be too reliant on one source of energy or on supplies from one country. The task that the energy review has been set is therefore not an easy one, but when it reports in July I am sure that it will set out a clear strategy for the way forward.

Baroness O'Cathain: My Lords, I thank everybody wholeheartedly for their contributions to this debate. Although I originally felt that it was a dubious prize to win the ballot, I could not have been more wrong. It has been a great, fast-moving—and certainly not boring—debate. I have learnt a huge amount and I thought that I was up to speed on developments, not only on the economic side of energy, but on the supply situation.
	To go back to a few of the points raised, I particularly thank the Minister for coming up with some very positive points, namely that the Government will encourage the planned link situation and encourage the energy companies. I hope the Minister, in turn, will remember that in this debate not a single person asked for government money. All we want to do is to encourage: we want encouragement from the Government; we will encourage the Government. I rather liked the fact that my noble friend Lord Patten promised any help the Government want on nuclear energy, as we have helped them out on education.
	We all referred to the contribution of the noble Lord, Lord Owen. He certainly made me think that a lot of my Whitsun Recess reading will be centred on the books on Russia which have remained unopened on my bookshelf. I fear that, like many of my friends, I tend to see Russia has having huge amounts of money to spend on Chelsea Football Club players, and assume that everything must be rosy there. The noble Lord was quite right to draw our attention to the fact that it is not. The noble Lord also made us look again at the whole workings of supply and demand. If you have a scarce commodity that is about your only resource from which you can earn money overseas, there is a huge temptation. One can only hope that wise counsel will prevail and that Russia will not try to kill the goose that lays that golden egg. The speech was most useful and I thank the noble Lord, Lord Owen.
	We also need to thank the noble Lord for stressing the geopolitical nature of the issue. The Minister also raised that point. I was particularly struck by the point made by the noble Lord, Lord Owen, that we can never rely on a change of attitude in France, Germany or Italy. That is becoming increasingly clear, as was witnessed by the recent raids, which were also mentioned. The flexibility of movement between diverse sources of energy is something we must all aim for. I do not think anybody would want to put all their eggs in the renewable sources basket, the nuclear basket or the gas basket. We have to keep this thing going, because we never know where the next pressure points will be.
	The Minister said that the forecasts were consistently wrong. I am glad he did not say that the economists were in charge; I think they probably were. I also thank my noble friend Lord Jenkin for his description of the Hatfield project. I realise that that is something else I must read up on. It was useful, but not surprising, to know that throughout this country—which has always been innovative in every part of industry—this sort of innovation is going on. The other thing that was new to me was the onboard gasification in, I think, Newcastle. That is pretty good.
	My noble friend Lord Dixon-Smith gave us a canter around the whole energy scene. Once again, there were little nuggets there which I am sure we will enjoy thinking about. My noble friend Lord De Mauley made a great plea for removing obstacles. This is right and ties in with my point about looking for encouragement and trying to do away—though not in a massive way, like the French—with nimbyism, which we must get away from. However, we should not be like the French, who knock down everything in sight when they want to build something.
	The noble Lord, Lord Redesdale, made a very good point about fuel poverty, as did my noble friend Lord Jenkin. It is something we must keep always at the back of our minds. Sometimes we tend to get things slightly out of perspective in the rather rarefied atmosphere in which we exist. I am sure that there are plenty of other points, but I do not want to hold up the Statement on pensions. I shall just say to every person who took part in this debate: it has been a great delight and thank you very much. I beg leave to withdraw the Motion for Papers.

Lord Hunt of Kings Heath: My Lords, with the leave of the House, I shall repeat a Statement made in another place by my right honourable friend the Secretary of State on pensions reform.
	"Our first priority has been to tackle pensioner poverty. Compared with 1997, we are spending more than £10 billion extra each year on pensioners. Almost half of this spending is going to the poorest third. We have raised the minimum income from a totally inadequate £69 in 1997 to over £114 today. As a result, for the first time in a generation, pensioners are now less likely to be poor than anyone else. We have acted to tackle the loss of confidence in the private pensions market. We have legislated to clear up the pensions mis-selling scandal, created the Pensions Regulator and the Pension Protection Fund.
	"We established the Financial Assistance Scheme to help some of those who stood to lose the most from schemes that collapsed before 14 May 2004. I know that many Members have been concerned that the scheme is limited to those within three years of retirement. My right honourable friend the Prime Minister announced in March that we were expediting a review of the Financial Assistance Scheme. I am delighted to announce today that the scheme will be extended to cover eligible people who were within 15 years of their scheme's normal retirement age on 14 May 2004. Under this extension, the Government will top up to 80 per cent of expected core pension for those within seven years of scheme pension age, 65 per cent for those within eight to 11 years of scheme pension age and 50 per cent for the remainder. So we have made real progress on pensioner poverty. Despite these improvements there remain significant challenges.
	"We established the Pensions Commission in 2002 to consider what reforms might be necessary to meet them. I am grateful to three commissioners— the noble Lord, Lord Turner, Jeannie Drake and John Hills—for the work they have done. In its report last November, the commission made it clear that there was no immediate pension crisis, but that there would be if we did not act soon. It identified four major challenges. First, it found that between 9 and 12 million people are not saving enough for their retirement. Secondly, it estimated that by 2050 there will be 50 per cent more pensioners than today. Over the same period, the ratio of people in work to those in retirement will halve. Thirdly, as a result of historical legacy, the current state pension system is complex and delivers unfair outcomes, especially for women and carers. Of those who recently reached state pension age, 85 per cent of men have a full entitlement to a basic state pension, compared to only 30 per cent of women. Finally, if we maintain current indexation, the basic state pension might be worth only £35 in today's earning terms by 2050, and over 70 per cent of pensioner households could be eligible for pension credit—never the Government's intention.
	"The commission urged the Government not to duck the long-term challenge of reform. I believe the proposals in the White Paper I am publishing today address the challenges the Pensions Commission identified. We will therefore introduce a new system of personal accounts that will make it easier for more people to save. We will reform state pensions so that they are simpler and more generous. We will modernise the contributory principle and make the state pension fairer and more widely available. We will increase the state pension age, keeping the proportion of life spent receiving the state pension stable for each generation, and helping to secure the long term financial stability and sustainability of the state pension scheme.
	"Let me take each of these in turn. A new system of personal accounts will be introduced from 2012, providing over 10 million people with the opportunity to save in a low-cost savings vehicle. Employees will be automatically enrolled into either their employer's scheme or in the new personal account but will have the right to opt out. The accounts will provide a simple way for people to take personal responsibility for building their retirement income.
	"Employers will be required to contribute 3 per cent of employee earnings in a band between £5,000 and £33,000. Employees will contribute 4 per cent on the same band of earnings and a further 1 per cent will be contributed in tax relief.
	"I recognise that these changes represent a major change in the pension system. Accordingly, we are taking steps to help smooth the introduction of this reform. Employer contributions will be phased in over at least three years. The contribution rate will be fixed in primary legislation. In order to minimise the burden on the smallest businesses, we will consult on additional transitional support and whether a longer phasing period is needed. However, the Government are clear that reforms to private pensions must go hand in hand with reforms to the state pension system.
	"During the next Parliament, we will re-link the value of the basic state pension to average earnings. Our objective, subject to affordability and the fiscal position, is to do this in 2012, but in any event at the latest by the end of the Parliament. We will make a statement on the precise date at the beginning of the next Parliament. This will help to preserve the value of the basic state pension. We will also simplify the state second pension so that it gradually becomes a flat-rate weekly top-up to the basic state pension.
	"This means that a person retiring in around 2050 who has been in employment or caring throughout their working life could receive a contributory state pension worth £135 a week in today's earnings terms, which is £20 a week above the guaranteed income level. Without these reforms, people retiring in 2050 would receive a total contributory state pension worth between £90 and £100 a week, well below the means-tested threshold.
	"We will continue to uprate the standard guarantee in the pension credit with average earnings from 2008. The pension credit will continue to help the poorest pensioners. But we will also be able to limit the spread of means testing. We will make an immediate start on this by modifying the calculation of the savings credit from 2008. This gives a clear indication from the outset of our determination to make clear people's incentives to save. As a result of this change and our restoration of the earnings link, by 2050, far from rising to 70 per cent, we estimate that only about a third of pensioners will be eligible for pension credit.
	"Our reform to the state pension must also achieve fairer outcomes for women and carers. But we do not believe that a residency test for future accruals as proposed by the Pensions Commission would be the right way to achieve this. It would offer no immediate help to a group of women aged 45 and over who have poor contribution records and no time to put this right.
	"That is why from 2010 we will introduce radical changes to the current rules, reducing the number of years needed to qualify for the basic state pension to 30 and improving the system of credits to better reflect the different ways in which people contribute to society. As a result, by 2010, 70 per cent of women reaching the state pension age will receive a full basic state pension compared with 30 per cent today. By 2020, up to 270,000 more women will get a full basic state pension—approximately three times the number than under a residency-based approach.
	"We propose to increase the state pension age in line with life expectancy. The state pension age for women is already due to rise from 60 to 65 between 2010 and 2020 to equalise with men's state pension age. There will be a subsequent rise for both men and women from 65 to 66 over a two-year period from 2024, and further increases, also over two years, to 67 starting from 2034, and to 68 from 2044. No one over 47 today will be affected by these changes.
	"Finally, today's White Paper proposes a number of simplifying measures that will streamline the regulatory environment. We will abolish contracting out for defined contribution schemes at the same time as we restore the earnings link. We will reduce the burdens on schemes by bringing forward legislation to allow them to convert guaranteed minimum pension rights into scheme benefits—reforms that will, I believe, be of significant benefit to employers and employees.
	"We will bring forward legislation to begin implementing these reforms in the next Session. In November, I set out five tests for the reform of our pensions system. They needed to promote personal responsibility, be fair, especially to women and carers, simple to understand and affordable and sustainable for the long term. I believe we have met these tests.
	"Today's White Paper seeks to entrench a new pensions savings culture where future generations can take increasing personal responsibility for building their retirement savings. While there will always be specific individual circumstances, such as debt or stock market performance, which will affect people's savings, fundamentally these reforms mean that people should be better off in retirement by having saved.
	"What is more, this package of reforms continues to protect the poorest pensioners from poverty, and for the first time delivers fair outcomes for women and carers with a modernised contributory principle operating within a more simple overall architecture. Over the period to 2020, our proposals broadly keep spending on pensioners as a proportion of national income constant at today's levels, helping pensioners to share in rising national prosperity. In the long term, the rise in the state pension age will help secure the long-term financial stability and sustainability of the state pension system.
	"Together it represents a comprehensive, integrated package of reform. I believe it can lay the foundation for a new and lasting consensus on a long-term resolution of the pensions challenge we face as a country. I commend this White Paper to the House".
	My Lords, that concludes the Statement.

Lord Skelmersdale: My Lords, the House will be grateful to the Minister for repeating this Statement on the hugely important subject of pensions and how the Government intend to proceed following the publication of the three reports from the Pensions Commission of the noble Lord, Lord Turner. I too give credit to the commission.
	From what we have been reading in the press, the publication of this White Paper has followed intense haggling between the Prime Minister and the Chancellor of the Exchequer—more, as I understand it, on the affordability of the commission's proposals than on their substance. While a responsible Opposition understand affordability, I regret that nothing will happen on state pensions until 2012. For the Prime Minister, this is a "Get out of Gaol Free" card. What the Government feel is currently affordable, though, is a very welcome extension of the financial assistance scheme, which my party has always regarded as being distinctly mean.
	Naturally, it is the substance of the rest of the Statement that concerns us and millions of our fellow citizens today. I shall come to that in a moment. But before I do, I have a complaint.
	At the time of the original Statement announcing the second report of the commission late last year, the Government made it clear that they were seeking a consensus between all political parties on the matter. I have to tell your Lordships that, search as I may, I have seen no efforts that they have made to achieve that objective, unless you count a brief meeting that my honourable friend Mr Hammond had on Thursday last with the Secretary of State. I have to say that I do not.
	What we have here is a twin-track approach intended to alleviate the desperate state of retirement income that the Government have presided over during the past nine or so years. The first is the reform of state pensions. What is proposed is nothing more than a tax on employment. The current 44 years of working and paying NICS is to be reduced to 30—except that it is not really. Yes, you will be eligible for a full and higher state pension, rising with average income—which I welcome—after 30 years in work, but it will not be payable until you are 66, 67 or 68, depending on the year you reach that birthday. If you remain in work beyond the 30 years, you and your employer will still be liable for NICS. Not only is this yet another stealth tax, it is bound to do exactly the opposite to what the Government's employment strategy wants and encourage people to retire early—as long, that is, as the individual has enough money to live on until the pension becomes payable.
	What changes to the income support strategy do the Government envisage to obviate this? Yes, I agree that this new 30-year rule will help people—mostly women—with caring responsibilities, but I assume that men and women will be treated equally, as they will be under EU law as far as pension age is concerned. The changes to home responsibility allowance are also welcome. Currently a carer may have to wait many weeks to get it. The new weekly credit is much fairer.
	The choice that has been made on the future of the state second pension does not, however, seem very fair. It is to become, as I understand it, payable at a flat rate. However, will it not still be contributed to on the same basis as now? At present, it is graduated, and nearly half of national insurance contributions go toward it. As my noble friend Mr Hammond said:
	"Under the government's proposals that contribution will become a straight tax on income".
	That is a sorry and unfair state of events.
	I turn to private employer pensions. I am on record as saying that the Pensions Commission's proposal for a default scheme to ensure that virtually everyone in work will have a private as well as a state pension is the right approach. How will the Government see that the default level of 30 per cent will not become the norm, making the pension payable to so many millions of workers that much worse? As to the right level of contributions, we have plenty of time—some five years—to consider the details. I am glad, though, that the White Paper includes something that I called for in the excellent debate led by the noble Lord, Lord Turnbull; namely the phasing in of employers' contributions. However, why cannot the NPSS be introduced earlier than 2012? The longer the delay, the less that people now in work without a non-state pension will have to spend in retirement.
	Finally, how will the Government's intentions be judged? They must provide dignity in retirement. They must be fair, not least when comparing public sector pensions with those in the private sector. They must be affordable, unlike the citizen's pension. They must provide for and increase personal responsibility, to which I would add the need to re-establish the savings culture. Lastly, they must be simple and understandable by everybody in work. I am afraid that, against those five tests, I find that this White Paper is nothing less than a curate's egg.

Lord Oakeshott of Seagrove Bay: My Lords, I also thank the Minister for reading the Statement. I declare my interest as a pension fund investment manager for the last 30 years. I share the welcome for the report of the noble Lord, Lord Turner, and for what I am bound to call, I am afraid, these rather mean and timid steps in the right direction. The White Paper,
	"seeks to entrench a new pension savings culture".
	Does the Minister accept that those words will ring hollow to well over 100,000 people robbed of their pensions when their schemes collapsed? We welcome the improvements announced today in the financial assistance scheme, but how much more money is being added to the present paltry £20 million a year?
	A new pension savings culture will also be hard to achieve when we are starting from such a high level of means testing. I searched the White Paper without success—speed-reading as fast as I could—for any admission of what the figure is today. In all the briefing and spinning that were going on last week, we were told that it was 40 per cent. Yet we know from an answer that the Minister gave me only two weeks ago that, in 2003–04, the figure was already 46 to 51 per cent. So, what is the department's estimate of the number of pensioner households subject to means testing today? What confidence can we have that we will see means testing being run down as the forecast predicts? The forecasts in the bar charts in the White Paper, if I read them correctly, also seem rather lower than the forecast starting level in 2010 that I was given.
	Those are important points because the national pension savings scheme, which we support, cannot be really sustainable or strong unless means testing is quickly reduced. Otherwise—and I fear that this is still the projection on the White Paper figures—there is even the risk of suggestions of pension mis-selling when compulsion comes into effect. So, means testing is critical and we are concerned that the index-linking of the basic state pension is being put off as far as 2012, with no guarantee that it will happen even thereafter until 2015.
	Annuities were not mentioned. Another recommendation of the Turner Commission was that the starting level at which you have to buy an annuity should be raised in line with life expectancy. Noble Lords may recall that the then Minister, Mr Wicks, gave an assurance in the final stages of the Pensions Bill that that would be reviewed at the time of Turner. I see an answer in the White Paper which is breathtaking in its insolence. The Government seem to turn a blind eye to rising life expectancy only on the question of annuities.
	On women, why have the Government rejected the final recommendation of the noble Lord, Lord Turner, on the preferred way forward? Can the Minister confirm that giving a full basic state pension by right to people over 75, many of whom are women, would have benefited over three-quarters of a million women?
	The Government are trying to get Turner on the cheap. They have willed the end but not the means. Affordability of course is key, but they have completely ducked the question of the affordability of public sector pensions. We cannot continue with a divided Britain where so many people in the public sector enjoy pensions that are quite unaffordable and beyond the dreams of what people could afford in the private sector. The noble Lord, Lord Turnbull, who ought to know, put it well in a debate in your Lordships' House on 4 May. I calculate that he has a pension pot that would cost £3.25 million to buy today in the private sector. The noble Lord said that the recent public sector pension bill was frankly indefensible. We should face up to that.
	I end with a note on consensus. I share the thoughts of the noble Lord, Lord Skelmersdale, that there has been no attempt to reach consensus in the run-up to this White Paper, but none the less we will do our best to build on it. What has happened to the independent pensions commission that Turner recommended? I give notice now that when the Bill reaches your Lordships' House in the next Session, we will take the lead in amending the Bill if we possibly can to ensure that there is such an independent pensions commission along the lines of the Monetary Policy Committee of the Bank of England, particularly to look at setting the state pension age many years ahead. That would be a real and lasting way to entrench consensus on pensions.

Lord Hunt of Kings Heath: My Lords, I welcome the comments of the noble Lords, Lord Skelmersdale and Lord Oakeshott of Seagrove Bay. I searched for consensus on support for the main package. I think that I found it but I had to work hard to do so. Both noble Lords clearly mentioned "consensus". All your Lordships are agreed, as we have debated before, that it is absolutely essential to reach consensus if we are to have a lasting settlement on pensions. That must be the conclusion of anyone who has studied pension policy over the last 20 to 30 years. The Government are keen to engage there and to seek a consensual way forward.
	I believe that we owe enormous credit to the noble Lord, Lord Turner, and to his commission. The performance it achieved in the quality of its report, and now in its outcome, was remarkable. Noble Lords may have heard the noble Lord, Lord Turner, say this morning that he agrees very much with the broad thrust of what the Government have decided. The pension debate that we undertook up and down the country was also a way to build consensus, but I am anxious to continue those discussions and will of course be happy to hold meetings with your Lordships and officials to discuss the details when we return after the recess.
	The noble Lord, Lord Skelmersdale, referred to haggling; I am not sure what he meant by that. We have had vigorous discussion within government, as would be expected on such an important issue. Today's Statement is very important and the Government are fully behind it. It provides considerable certainty for 30, 40 or 50 years ahead.
	I welcome the support that both noble Lords gave to extending the financial assistance scheme. The noble Lord, Lord Oakeshott, asked how much extra money is being put in. Over the whole life of the scheme, we expect the cost to be about £2.3 billion, but I am happy to set out in some detail how we think it will be spent in the intervening years. I know of the frustration that all noble Lords feel about the rate of payments made so far from the FAS. I can report that there have been constructive discussions with pension find trustees about the basic problem of getting the information supplied as quickly as possible, and we are obviously keen to ensure that the matter of payments is speeded up.
	I did not agree with the noble Lord, Lord Skelmersdale, on the point he raised about the uprating of the basic state pension in line with earnings. Along with the issue of national insurance payments, the issue of flat-rating of the second state pension and the issue of contracting out, this has to be seen as a broad package. The flat-rating of the second state pension, which will take place over a considerable number of years, is in line with the Pensions Commission's deliberations in that area. It clears the space towards personal accounts and it helps towards the cost of some of the other changes being made. That is a reasonable adjustment to make.
	The noble Lord asked about the phasing in of personal accounts and asked why we are allowing time for that to happen. There are two points to be made here: first, on any count, this will be a major undertaking, and it is important that we get the infrastructure right, have the arrangements in place and are confident that it is ready to go. It requires careful timing. He did not mention it, but in the White Paper we make clear that we are still of a view that the model suggested by the commission for the NPSS is our preferred model. However, we continue to discuss with the private sector the other options it has put forward, and we will come to a conclusion about that in the autumn. The noble Lord, Lord Oakeshott, was rather unfair when he used the words "mean" and "timid". Overall this is a good package, and, importantly, it is affordable.
	The latest means testing figure I have is between 43 per cent and 48 per cent. We are confident that the figures will come down, as has been outlined in the White Paper. I recognise that because figures are not attached to the bar charts it is quite difficult to analyse them. I will undertake to produce the figures that go with the bar charts and put them in the Library as soon as possible, so that noble Lords are absolutely clear what the figures are.
	Regarding annuities, the Government are of the view that 75 is the appropriate uprate limit at the moment, but we will keep that matter under review. We have discussed the matter of public pensions on a number of occasions, and the fact is that what has been negotiated in outline, with individual scheme negotiations having taken place or taking place, reaches the cost envelope set by the Treasury. I remind noble Lords that, given the turnover in the public sector, it will not be too long before the majority of public sector employees will be covered by the new arrangements. That does not differ very much from the approach taken by many private pension schemes.
	Finally, I say to the noble Lord, Lord Oakeshott, with regard to our decision not to agree to the establishment of a standing pensions commission, that we are not persuaded that we need another quango, if I may put it that way, in permanent residence over the next 40 or 50 years. From time to time we may well set up bodies to review some aspects of pension policy, but I have no doubt we will debate that at some length when we bring legislation before your Lordships' House.

Lord Hunt of Kings Heath: My Lords, I shall comment on two points made by my noble friend. On affordability, the position is absolutely clear. We would like to start the uprating in line with earnings for the basic state pension in 2012. That is subject to affordability, but it will be done at any rate by the end of the next Parliament and we shall make a Statement on it at the beginning of the next Parliament. I am very confident that we shall be so doing.
	On retirement age, I understand the point about those who do heavy manual work and how long they can work. It is individual matter. Whatever socio-economic class people come from, on average everyone is living longer, but much work needs to be done on re-skilling and on encouraging employers to take on and keep on older workers. I have no doubt that we shall debate that in the future.

Baroness Perry of Southwark: rose to call attention to the role of non-departmental public bodies in the conduct of government; and to move for Papers.
	My Lords, I am pleased to have this opportunity to debate the role of what we call NDPBs—non-departmental public bodies—or, more concisely, quangos. Although those two names mark a slightly different definition, for the purposes of our debate they may be classed together as encompassing any public body that is set up by government to deliver policy objectives.
	It might be helpful just to reflect for a moment on those names. NDPBs are, indeed, public bodies; that is to say, they are financed out of our money as taxpayers, and their business is reported from time to time in public documents—some more often than others. They are non-departmental; they are not subject to the rules of the Civil Service in respect of the appointment of their members or the conduct of their business, although each is set up by a government department and, in theory at least, they report through a department to Parliament. The alternative name "quango" is also interesting. It means, of course, quasi autonomous non-governmental organisation. Such an organisation is not a full part of government and it has a quasi—or sort of—autonomy. That is a definition which challenges much current practice.
	I hope that the Minister has not been briefed to defend in his reply the many excellent examples of NDPBs. I should make it clear from the start that I am an admirer of many such organisations and respect the role that they necessarily play in the conduct of government. I have been a member of several NDPBs, and chair of at least two. As a former chief inspector in the education department, I worked with some excellent organisations for which the department had responsibility, and assisted in the setting-up of at least one important organisation in the area of teacher education—so no argument from me that NDPBs cannot be wholly beneficial.
	There is, however, much concern about their use as a way of government delivering their business, both in relation to the way in which members are appointed and in the transparency of their operation. It is, therefore, necessary to examine what these bodies do and the reason for their creation. Why do we have, for example, a large funding council for higher education, responsible for the disposition of £9 billion of public money, instead of having the funding distributed by the Department for Education and Skills itself? Why does the Department for Culture, Media and Sport devolve its scientific responsibilities almost wholly to NDPBs, instead of appointing its own internal expert advisers?
	Of course, it makes good sense that some decisions and the oversight of some taxpayer-funded activities are undertaken by experts in the field and not by civil servants in the government department, whose expertise is of a different kind. The excellent NICE—the National Institute for Health and Clinical Excellence—the universally admired Human Fertilisation and Embryology Authority, the UK Film Council under DCMS or the Animal Welfare Advisory Committee under the Department of Defence are but four examples of such bodies, where experts meet to set standards and oversee areas of publicly funded activity, as well as to provide expert advice to the responsible Minister. Such bodies are, unquestionably, a proper way for government to conduct their business.
	We also have a raft of regulators whose job it is to oversee the functioning of public, privatised or semi-privatised business. Ofwat, Ofsted, Ofcom and so on all play a role which, while causing some frustration from time to time because of the methods employed, is nevertheless broadly accepted as a safeguard of standards of provision by the general public. While there are many issues about the composition and operation of these regulators, it probably and usually makes sense for them to be constituted as non-departmental.
	Other reasons may be less clear or defensible. Quangos can be a popular way for Ministers to demonstrate that something is being done about an issue of concern. Are the media and scientific community worried about global warming and carbon emissions? Let us set up the Carbon Trust and the Energy Saving Trust to encourage business and private consumers towards carbon reduction—problem solved. We have a prestigious university not accepting one student from the north-east. Set up an office for an access regulator—problem solved. And the ultimate height of absurdity: are there are too many regulators getting in the way of universities' proper business? Set up a new quango called MIAP—Managing Information Across Partners—and a Higher Education Regulation Review Group, or HERRG, with, of course, a new tsar to oversee the effectiveness of the two new quangos who is supported to co-ordinate the existing quangos. Yes, truly, this appointment was announced only yesterday.
	Quangos with funny names and obscure purpose come and go. In the recent past, we have had a Sustainable Consumption Roundtable, an Agenda for Change Central Negotiating Group, an Activities for Managing Life Working Group, a Futurebuilders Reference Group and even an Urban Gull Leaflet Steering Group—the mind boggles. All those are now defunct, rebranded or merged into other quangos. It is no surprise that in the eyes of the public many such quangos appear to have become a substitute for action, though often adding huge cost to the public purse. The danger of such proliferation is, equally, that these organisations can become a smokescreen behind which Ministers hide from their direct responsibility. As the recent report of the Science and Technology Committee of this House noted, the plethora of agencies set up in the field of energy were undirected by any one Minister with responsibility for the vital issues of energy efficiency and renewable energy sources.
	Accountability is also an issue. The Power inquiry established and funded by the Joseph Rowntree Charitable Trust looked at the reasons for the decline in public participation in formal politics. In its report published in February this year, it commented:
	"Appointed authorities—quangos—have gained extra powers, particularly at the expense of local councillors. Wide areas of public services which were once the remit of a local Council are now governed by committees appointed by ministers . . . The result of these shifts has been to make political decision-making more opaque, hidden and complex . . . The Power Commissioners saw at first hand how a lack of real influence over decision-makers has become a primary cause of alienation from formal democracy, and recognise that those processes which have produced greater distance between governed and governors are a source of deep concern".
	The growth of quangos has, in my view and that of many others, broken the long tradition of the chain of accountability from locally elected councils to their electorate, and from civil servants to their Minister, who is accountable to Parliament and so to the British electorate. As a civil servant for 17 years, I am well versed in the absolute recognition of such accountability, and no matter what the quality of our Ministers—and they did vary—we were always mindful that they were the representatives of the electorate, and answerable ultimately to that electorate for our actions.
	Quangos have less direct involvement with Ministers, with no Civil Service tradition, and their arm's-length operation is less open to parliamentary scrutiny. Partly for this reason, as well as for serious doubts about the democratic deficit that they represent through the appointments procedures, there is wide public mistrust and even cynicism about NDPBs. When the Committee on Standards in Public Life conducted an inquiry into public attitudes two years ago, it found that there was a profound belief that the people appointed to serve were politically motivated cronies of the Government. In the fields of education, health and housing, particularly, this democratic deficit is felt most keenly, since the distribution of large sums of public money is determined by these unelected bodies.
	There is good reason for such public cynicism. Nine years after the Government's Green Paper, Opening Up Quangos, which set out the laudable intention to improve quangos' openness and accountability, there has been little for the public to cheer. Some appointments have been removed from political control, such as those subject to the excellent Office of the Commissioner for Public Appointments, established in 1995 by the Conservative Government and under the expert guidance of the noble Baroness, Lady Fritchie. There are, though, still far too many cases where the Minister has retained the right of appointment. The result has been seen to be a committee or public body chaired by someone and composed of people close politically and even personally to the Government. Such bodies lose the desirable independence of government, which was one of the reasons for their status outside any department, and operate far too closely to Ministers, doing exactly what is ordered. It is here that the real danger lies. In sum, too many non-departmental public bodies are neither accountable nor independent, and this is the worst of all worlds.
	That brings me to the question of numbers and money. Overall, there are 910 NDPBs now listed in England. The figures no longer include those sponsored by the devolved Administrations, nor those which have been merged, thus deceptively implying a reduction over the last eight years. Two hundred and fifty of those are located in our expensive capital city. The costs are not easy to identify, but some figures bear close examination. For example, the Milk Development Council—whose sole purpose seems to be to get us all to drink more milk—has grown from seven employees to 49 in recent years; the Environment Agency hired no fewer than 500 new staff last year; and, in that same year, One North East, which aims to attract investment in to the Newcastle area, increased its numbers from 225 to 338. This last led the research director of the Economic Research Council to comment:
	"This is an insult to Geordies. 78% of them voted against the North East Assembly; they got that and now they've got an exploding, unaccountable quango to boot".
	One North East increased its spending last year by 25 per cent to £250 million. The British Potato Council manages to attract a budget of £6.5 million, while the Home Grown Cereals Authority last year spent a whopping £10 million.
	The size of the pay packets of the officials running these bodies has also been an issue of public concern. The chief executive of the Gambling Commission, Jenny Williams, took over the job from her predecessor, who was paid £79,000. She was given a salary of £120,000, an increase of 51 per cent to do the same job. Last year, the head of the National Clinical Assessment Authority received a pay rise of 24 per cent, while even the chief executive of the Millennium Commission—yes, there is still such a post—received a pay rise of 16 per cent; this in a year when the Chancellor had urged public sector unions to restrict their pay demands to 2 per cent. As one journalist commented in January this year, we should remember that every pound that is spent on quangos is a pound that is not spent on teachers, nurses, hospital equipment and police officers.
	This is an issue which any government must address. The lack of public trust in and alienation from the political process engendered, as we have seen, by the growth of quango-government poses an increasing threat to our democratic heritage. The replacement of loyal and expert civil servants, steeped in the democratic tradition, by unelected members of the public, often known as cronies of their appointing Ministers and dependent on ministerial approval for their comfortable pay and conditions, is a recipe for ill conceived and impractical political ideas masquerading as policy. I do not believe that we have a Government of ill will; they came to power with every intention of avoiding the trap into which they have fallen. I can only ask the Minister to work with his colleagues across the Government to redress the balance—to retain those excellent and necessary NDPBs that we all applaud, but to strip away the rest. I beg to move for Papers.

Lord Tunnicliffe: I thank the noble Baroness, Lady Perry, for initiating the debate. I intend to take a very liberal interpretation of the subject matter. The 406-page document on public bodies in 2005 makes it clear that there is some distinction between NDPBs and public corporations, but I believe that in practice, public corporations, the NHS and other delivering bodies of a similar nature all serve a very similar role in our public life.
	I decided to speak in this debate as I realised that my life had been dominated by these sorts of bodies. I was for 20 years an employee of BOAC/British Airways, which was a public corporation. Towards the end of my career I started to have contact with government. For 12 years, I worked for London Transport, running London Underground, and for the final two years I was the chief executive of London Transport. I attended that board for 12 years and had massive contact with government and their relationship with quangos. For two years, I was chairman of the United Kingdom Atomic Energy Authority, which, I am assured, is a genuine NDPB—although I could never see the distinction.
	The reason that I want to speak is that those occasions where you think narrowly about an area forces you to try to understand better the role of the quangos in which you has been involved, without thinking through the relationship that they have in the state as a whole. One has first to address the state as a whole to understand the role of the quango in the state. When the state is functioning, it does two things: first, it decides what it wants to do, which we might loosely call policy, and then it decides how it wants to deliver what it has decided to do. It does that by using the democratic political process, and we have a tendency to stand in awe of that process and speak of it as if it is perfect in its nature and is a glorious institution.
	As a government Back Bencher, one spends more time standing back and watching that happen than participating in it. When one does that, one observes the process as reactive, dominated by yesterday's newspapers and public opinion, is frequently not reflective or patient and frequently puts beliefs and dogma before facts and analysis. I despair of the political and democratic process, until I am reminded of Winston Churchill's judgment that it may not be very good, but it is a great deal better than any of the alternatives. For that reason, I wholly and thoroughly support that process. But noble Lords should remember that test—it is the "least bad".
	When the state has decided what it wants to do, it then has to decide how to deliver that. A new law is delivered through the judiciary; but in many cases it is about delivering goods and services—principally services. Three or four decades ago, most of those services would have been delivered by the public sector. We have moved on. The private sector will frequently deliver the sort of services that were thought to be state services—not with the state totally withdrawing, but creating a framework whereby the marketplace delivers those services.
	Those transitions have not been without their problems and have not been universally successful. Even now, we look at those services and ask whether other things should be done that are more centred on securing the state. The state frequently provides things commercially—by PFI and by PPPs—and I have been very much involved in those. But when you are involved with them it is much easier to talk than to deliver. For that reason, in vast areas the state continues to decide that it has to carry out the delivery itself. It does that in two ways—either through the management of an alliance, often an uneasy alliance, of politicians and civil servants, or it uses quangos.
	We massively underestimate the value of the quango as an agent of delivery. I thank my noble friend Lord Borrie for mentioning the Home Office, which was this week's problem. In the past there was Defra, the MOD and tax credits. The performance of politicians and civil servants regarding delivery has been patchy, putting it politely. Should one be that surprised? The experience of Ministers can frequently be a matter of days. Ministers often have no experience in particular areas and in the complexity of delivery. They are not in post long enough to absorb them. Civil servants have a peculiar tradition that may meet the policy area, but they also have a tradition of rotating through roles and not picking up experience.
	There are problems with the adequacy of talent. We have a fascinating political system. We create a government party of some 400 souls who have been selected in draughty community centres around the country, often at meetings where some 30 people are present. From those 400 souls, we have to pick 120 people to run the country. It is not surprising that on some occasions such people are a bit thin on talent. Ministers' overwhelming problem is the issue of tenure. It would be a brave Minister who would predict that he would be in post in a month's time. How does a Minister build up the confidence to champion his department and build up the confidence of the staff?
	The alternative is the quango, which has much to commend it. It is a corporate body in itself that has legal status. It has a focus. It has both a legal and public personality. It has structure. Frequently it will have tradition. It has transparency. It is exposed to the Freedom of Information Act. The UK Atomic Energy Authority, which one would expect to be an overly sensitive beast, puts its board meeting minutes on the web. After some anguish, it released most of its activity freely onto the web and was accountably to citizenry as a whole.
	The board is capable of having the breadth and the right tensions that you would expect in the private sector between the non-executives on the board and the executives. It has vitality because of that tension. It has access to a wide range of talent—whether they be the talents of the board members, who may be skilled in delivery or, equally importantly, concern for customers. Usually, it has much more flexibility in hiring executives and being able to bring in people to a position where they can develop experience in an area of expertise. It is accountable and it is wrong to look upon such beasts as not being accountable. When you have been in front of Gwyneth Dunwoody as many times as I have, you will have a clear sense of accountability. All quangos run the risk of being in front of Gwyneth Dunwoody and her like—and, I can tell noble Lords, that you feel quite accountable at that point.
	Quangos are accountable through the Minister; so the situation with regard to accountability is much better than is frequently characterised. The key is that quangos are at arm's length to a greater or lesser degree. That arm's length makes them resilient to the whims of government. My God—do not the Government have their whims? Even at arm's length, there are many occasions that the Government want to come in and "do things", but the strength of quangos is that they can say, "No, I need a reason; I need you to put it in writing; I need you to explain the reasons", and that makes them very worthwhile bodies. Quangos are able to make plans and are allowed to have long-term vision on which they can deliver.
	Quangos frequently work in messy areas that are difficult for the public to understand. As a result, their operations often look inelegant and inefficient. But if I return to the test of democracy and whether quangos are the "least bad" solution, they frequently win by a significant margin over the alternatives.
	Generally, quangos do a very good job. We should recognise their strengths. We should thank the 21,000 people who contribute to the strength of our communities through their participation. Of course, we should look out for redundancies. We should look out for the quango whose benefits are less than the burden they create or impose. Perhaps we should also look more widely in the area of public administration and delivery. In areas that we have seen recently I sometimes feel that a quango might do a great deal better job than the uneasy alliance between Ministers and civil servants.

Lord Norton of Louth: My Lords, I too very much welcome the debate and congratulate my noble friend on having secured it. It covers an important but often overlooked topic. It is especially overlooked in its generic state. Particular non-departmental public bodies are variously the subject of public and parliamentary attention, but it is extremely rare to discuss such bodies as a particular species of institution. Indeed, even identifying how many such bodies there are and how they are distinguished from other public bodies is a demanding exercise. Non-departmental public bodies are numerous and, as we have heard, fall into different categories. If I may correct the noble Lord, Lord Borrie, the Cabinet Office distinguishes NDPBs into four categories, although the two principal ones are the executive and advisory NDPBs. I am concerned primarily with executive NDPBs.
	As the Cabinet Office document Classification of Public Bodies: Guidance for Departments makes clear, executive NDPBs are established to carry out a service or function at arm's length from government. As we have heard, they will have a sponsoring department, but they are not part of a department. As the guidance states:
	"They function deliberately at a remove from Ministers".
	They then fulfil an important role, as we have just heard, in delivering and advising on public policy but stand apart from government. It is the implications of that that I wish to explore.
	When the Constitution Committee of your Lordships' House carried out an investigation into the role of independent regulators, it was looking at bodies like NDPBs that are created usually by statute and fulfil a role at some distance from government. Indeed, some regulators have the status of non-departmental public bodies. Some of the issues pursued by the committee in addressing the role and accountability of regulators are those that I wish to raise today. If NDPBs are to fulfil their role as public bodies at arm's length from government, then it is important, as noble Lords have already said, that they are independent, transparent and accountable. Let me address each of these in turn.
	The reason for an arm's length relationship with government is in order to deliver a particular public service, often a specific and technical service where political considerations should not normally play a part and where an element of detachment may assist in involving affected bodies. We have just heard the benefits of that from the noble Lord, Lord Tunnicliffe. The independence is to some degree enshrined in the statute establishing the body, as well as in its capacity to appoint its own staff. Employees of NDPBs are usually public servants but not civil servants. However, NDPBs, as we have heard, cannot be totally independent of the sponsoring department. Ministers are normally responsible for the appointments made to the board, as we have already heard. The Minister may determine the policy and may be in a position to issue directions to the body.
	The question, therefore, is how well this relationship is monitored and policed. An NDPB cannot be totally independent either of government, who determine public policy, or of Parliament, which enacts the legislation establishing it and authorises its funding. It has to be accountable but at the same time operate at some distance from government. Much may depend on the individuals appointed to a board and on the personality of individual Ministers. But what institutional protection is there of the body's independence? NDPBs employ their own staff, but I understand that in some cases civil servants are seconded to NDPBs. This may be useful in gaining or imparting particular knowledge, but it may blur the edges between the body and the sponsoring department. It would be helpful if the Minister could comment on the extent to which this occurs.
	A year or two ago, I put down a Question on that, and the reply revealed that no figures were kept. I would hope that, since that time, more study has been done to determine how often secondment takes place and on what scale. Could the Minister also tell us what guidance, if any, is given to civil servants on their relationship with NDPBs? Independence can also be facilitated by transparency. If what an NDPB does is as transparent as possible, then it is possible for others to see to what extent it can operate effectively at arm's length from government. Transparency is also a prerequisite for accountability. Transparency should thus be an essential feature of non-departmental public bodies. The importance of openness is stressed in the Cabinet Office publication Non-Departmental Public Bodies: A Guide for Departments. Indeed, it devotes a whole pamphlet to "Openness and accountability". It identifies a number of ways in which departments and the bodies they sponsor,
	"can aim to be more open and transparent".
	Paragraph 3.1 in pamphlet j states:
	"Departments and public bodies should produce and distribute widely information on their role and achievements, making full use of internet. Annual reports and accounts are the main vehicles by which departments and public bodies regularly inform parliament and the public about their activities and expenditure".
	Paragraph 3.2 states:
	"Departments and public bodies are encouraged to hold open meetings at least annually".
	The important point about those statements is that they are telling NDPBs what they should do and what they are encouraged to do, but not what they are required to do. Some NDPBs are required by statute to produce and make publicly available annual reports, but not all are required to do so.
	The question arises, therefore, as to what extent NDPBs actually achieve high levels of transparency. As the Minister will be aware, the Public Administration Committee in the other place published a report in 2001 entitled Mapping the Quango State. In it the committee identified various criteria by which to assess the accountability and openness of executive and advisory NDPBs. It listed 15 criteria for executive NDPBs and 13 for advisory NDPBs. For executive NDPBs, it included whether the body was required to publish annual reports and to hold public meetings and whether it was subject to full audit by the National Audit Office. The findings were revealing and somewhat disappointing. The committee found that although the proportion of executive NDPBs required to comply with the accountability measures had increased, overall they still complied with only just over half of the accountability measures. Three-quarters were subject to the jurisdiction of the ombudsman and had instituted complaints procedures, but only 64 per cent were subject to full audit by the NAO—a fall from 81 per cent in 1997. Only 17 per cent held open annual meetings or other public meetings. There is thus a gap, in some cases a significant gap, between what government believe NDPBs should be doing and what they are doing.
	Therefore, can the Minister tell us what steps have been taken to improve the compliance rate of executive NDPBs with the accountability measures identified by the Public Administration Committee? To what extent has the position improved since 2001?
	In its report The Regulatory State: Ensuring its Accountability, the Constitution Committee identified what it termed 360 degrees of accountability. Regulators are accountable to the consumer, the regulated body, interest groups and citizens, as well as to government, Parliament and the courts. The position is somewhat similar for NDPBs. In terms of formal accountability, Ministers are answerable to Parliament for the bodies falling within the sponsorship of their departments. Each departmental Select Committee in the other place examines not only the relevant department but also associated public bodies. NDPBs are also subject to review within government.
	With the abolition of quinquennial reviews, departments are expected to review regularly each NDPB to determine whether they should continue and, if so, whether the functions could be fulfilled more efficiently. On the face of it, there is thus a fairly extensive mechanism of accountability to Parliament and to government. NDPBs also interact with affected bodies and are subject to judicial review.
	There are, though, two problems with this accountability. One is that it is not necessarily comprehensive. Departmental Select Committees cannot be expected to undertake extensive inquiries into the work of all NDPBs. Small NDPBs may fall outside the scope of end-to-end business process reviews undertaken by departments. They should be reviewed, but there is no formal requirement that they are. It would be helpful if the Minister could tell us to what extent the Government monitors departmental practice in conducting reviews and to what extent departments complete their reviews within the recommended six-month timeframe.
	However, it is the second problem that I wish to emphasise; that is, the extent to which accountability exists at the level of the particular but not the general. Each executive NDPB may be reviewed by its sponsoring department. It may be the subject of parliamentary investigation. However, although specific NDPBs may be subject to investigation, there is no continuing means of reviewing NDPBs as a particular species of governmental body. The Constitution Committee, in looking at regulators, argued that regulators were subject to review but the collectivity of regulators—what it termed "the regulatory state"—was not. The extent to which we have arm's length government through NDPBs is largely determined through the creation of individual bodies to meet particular needs. Their creation takes place within a particular set of criteria, but the contours and impact of such bodies collectively is not monitored on a continuous basis. There may be a one-off inquiry by a parliamentary committee—as with the Public Administration Committee in another place looking at the quango state and the Constitution Committee in this House examining the regulatory state—but there is no means of checking on a regular basis what is happening to the quasi-government state of non-departmental public bodies. This is an issue for Parliament. How do we keep a check on what is happening? However, it is also an issue for Government. To what extent do they seek to monitor the overall scope, impact and cost of non-departmental public bodies? We know how many they are and what each does, but do the Government plan to examine their collective impact?
	I may seem to have put a large number of questions to the Minister, but in essence they all boil down to this: to what extent are the Government taking steps to protect the arm's length independence of NDPBs, while at the same time ensuring that they are transparent and accountable, both individually and collectively? These bodies, as we have heard, are numerous, consume significant public funds and are not neutral in their effect. It is essential that they are fit for purpose and that we know they are. Even if the Minister does not give a full response today, it is crucial that the Government address the questions I have posed.

Baroness Gale: My Lords, I too would like to thank the noble Baroness, Lady Perry, for bringing this debate before us today. My contribution will be slightly different from those of noble Lords who have spoken today. However, I was interested when the noble Baroness, Lady Perry, mentioned quangos because of what has happened in Wales. Recently, the Welsh Assembly started the progress of bringing quangos under democratic control. Suddenly the public just loves quangos. For example, in the Welsh Development Agency, which is now under the democratic control of the Welsh Assembly, quite a battle was going on. People felt that it should stay as a quango because it was at a slight distance from the Welsh Assembly.
	I declare an interest. I serve as the Welsh representative on the board of the Women's National Commission. I shall speak today about the work of that commission. It was established by the Labour Government in 1969. It provides a link between women's organisations and government with a remit of providing independent advice to the Government on the views of women. It is an advisory non-departmental public body, funded by government and staffed by civil servants. It operates at an arm's length distance from government. The Women's National Commission has over 450 partners made up primarily of women's organisations, both large groups and those at grassroots level, as well as many individuals with particular expertise.
	The main work of the WNC lies in responding to government initiatives and consultation exercises by co-ordinating the response from women's NGOs. The WNC works with women's organisations throughout the United Kingdom to bring the informed opinion of women to government. The chair and the board of commissioners of the WCN are appointed by open competition. The noble Baroness, Lady Perry, mentioned that she believed that many were cronies of the Government. I have declared an interest; but I do not know whether I would be regarded as a crony of the Government. If that means I support my Government, then yes, I do, and I support and am a member of the Labour Party. However, I had to go through open competition to get this post. I was amazed how much competition one had to go through, the whole procedure of interviews and so on, especially as it is a non-paid post. People on the commission could be regarded as volunteers, with the exception of the chair, who is paid. The board of commissioners is drawn from civil society. It gives the WNC strategic direction and a public face. The board comprises representatives from women's organisations and also includes seats for representation from Scotland, Wales and Northern Ireland.
	It must be recognised that the voice of women is still a minority one. I cite as an example the low representation of women in public life and the fact that only 38.6 per cent of public appointments are held by women. I could give a lot of other statistics to illustrate that fact, but I am sure that they are familiar to noble Lords.
	One of the WNC's priority work areas is violence against women. It is the only issue that has been continually identified by the WNC's partner organisations as both a cause and a consequence of women's inequality. The experience and fear of violence impacts on every aspect of girls' and women's lives, from their education to their employment and health. Violence against women in the UK is endemic. Almost half of all adult women in England and Wales have experienced at least one incident of domestic violence, sexual assault or stalking. One in four women in England and Wales and one in five women in Northern Ireland have experienced domestic violence. Domestic violence in England, Wales and Northern Ireland has the highest rate of repeat victimisation of any violent crime. In 2003 domestic violence alone accounted for a quarter of all violent crime.
	In response to requests from Ministers, who felt that the violence against women sector was not speaking to government with a coherent voice, the WNC convened a Violence against Women Group some six years ago. The group is now one of the WNC's most effective bodies, meeting regularly with government officials, parliamentarians and occasionally Ministers to advise them on policy matters. Last year the group launched, in partnership with Amnesty International UK and the TUC, the End Violence Against Women Coalition.
	The End Violence Against Women Coalition, which now stands at over 50 organisations, is lobbying the Government to adopt a strategy on violence against women. Last year the WNC conducted an independent analysis of the strategic framework underpinning the Government's work on violence against women. In terms of substantive initiatives, the sector acknowledges that this Government have done more than any other, particularly in respect of domestic violence and more recently of rape and sexual assault. The WNC welcomes recent initiatives regarding prostitution and the trafficking of humans.
	Work in the UK has primarily addressed forms of violence as criminal justice issues when, in fact, it cuts across all government portfolios such as health, education and housing. If government in the UK adopted a strategic approach it would streamline programmes and create better, more efficient and holistic public services. That would immeasurably improve the experience of women on the ground.
	Another initiative undertaken by the WNC is the Muslim Women's Network and Listening to Muslim Women. It is the Government's first wide-ranging national engagement with Muslim women where the women themselves set the agenda and tell government what the key issues are for them, giving a voice to an excluded group.
	Another instance where the Women's National Commission has been active is that we are now in the second year of running an exciting and unique programme for Iraqi women, called the Iraqi Women's Internship Programme. The aim of the programme is to build the capacity of Iraqi civil society groups to engage more effectively in the decision-making structures in Iraq on issues of gender equality. The WNC's engagement with women's civil society in Iraq involves capacity building and mentoring Iraqi women.
	The first round, which was successfully completed in October 2005, included a group of six women leaders representing the diversity of civil society groups in Iraq. On their return to Iraq, the women cascaded their learning to more than 150 women and men across Iraq. In March, the WNC was host to Iraqi women politicians and activists, who were able to see at first-hand how women in the UK can influence gender policies by building effective relationships through government and civil society and strategic partnerships. The aim was to expose the women to as many facets of women's engagement with democracy as possible, tied in with small-group training on leadership, strategic planning and human rights.
	One of the women spent one day shadowing me. I certainly learned a lot about what life was like in Iraq and I trust that she learnt from following me around your Lordships' House that day. The first group of interns also had the opportunity to visit the Welsh Assembly, where they shadowed women Assembly Members, again giving them a helpful insight in to the workings of a devolved Assembly.
	The Women's National Commission also represents the voice of women at the United Nations, bringing the voice of UK women into the international context in a number of ways, including forming part of the official delegation to the Commission on the Status of Women. That presents the opportunity for NGOs, often with the best-placed expertise, to feed into the negotiations. The WNC also facilitated the Shadow Thematic Report on Violence, a critique of the Government's initiatives on violence against women, providing bespoke information on a critical issue. In addition, once every four years, the WNC also publishes the official UK Shadow Report to the UN CEDAW report, providing an independent assessment of the Government's progress, which is invaluable for the examination of the Government's official report.
	At present, the Women's National Commission is working to influence the new Commission for Equality and Human Rights, which will replace the three existing equality commissions, and take up the three new strands of age, faith and sexuality, plus human rights. The WNC is part of the NGO umbrella group, the Equality and Diversity Forum and the Equal Opportunities Commission's Gender Duty Advisory Group. The key concern of the women's sector about the new commission is that concessions have been made to other groups. For example, there will be a disability committee, a disability commissioner and a statutory obligation to prioritise race and faith in the new commission's community cohesion work.
	On public duties, £3 million was given to CRE to implement the race duty in 2000; more than £4 million was given to the DRC to implement the disability duty; but only £500,000 was given to implement the gender duty. Although women very much welcome the gender duty, they need to see the same resources put into women's equality as into other groups. All that means that the WNC's work will be especially crucial with the creation of the new equality commission, because it will be the only voice for women speaking directly to government. I hope the Minister will agree that a non-departmental public body such as the Women's National Commission is a vital and enriching link to government, and that it gives a strong voice to otherwise excluded people and issues.
	I believe I have given several good examples of the work of the WNC. It works openly and transparently, with both women and government, and it has a proven record of success. Only one problem—funding—prevents the WNC from carrying out more work. I am aware of projects that could not be undertaken because of lack of funding. The WNC's budget for this year is £330,000. In 1996–97, it was £335,000. In real terms, it is now operating on a much lower budget than it did 10 years ago. I trust the Minister will acknowledge that the WNC is great value for money, but it would be even greater value for money if it was properly funded.

Viscount Eccles: My Lords, I, too, am very grateful to my noble friend Lady Perry for introducing this debate on NDPBs. There are so many variables in the subject that it is hard for the public to get their minds around the role and the purpose of NDPBs and, indeed, what they do. There may even also be a certain amount of confusion in your Lordships' House from time to time.
	The noble Lord, Lord Borrie, was kind enough to remind the House that he used to send references to the Monopolies and Mergers Commission, as it was called in those days, with the approval of the Secretary of State, and we used to send him reports. I well remember one report on the monopoly position of the London Rubber Company. I am not quite sure what happened to the reports; they used to go to the Office of Fair Trading and rather disappear into some process in which we played no further part. One day I might tell the House about the detail behind the inquiry but, since it would probably be the last speech that I would be allowed to make in this House, I will not do so today. Past involvement in non-departmental public bodies includes Royal Botanic Gardens, Kew, and the Commonwealth Development Corporation, which the Treasury wished to designate. It was a public corporation, but both the ODA and the Treasury applied non-departmental public body rules to it.
	I am afraid that I will overlap somewhat with my noble friend Lord Norton but, as a starting point, I would just like to say that a non-departmental public body must be independent if it is to be transparent and accountable. If it is not sufficiently independent, it is looking over its shoulder at the Secretary of State and his excellent officials, and it cannot afford to be either transparent or fully accountable because it will be in trouble if it says something that is disapproved of. If we are to pursue independence, we have the really serious task of following what is written in the guidelines, which have been mentioned. I will limit my remarks to executive NDPBs.
	There are some 200 executive NDPBs, 160 of which have been set up as NDPBs. The other 40 or so did not start that way but have been reclassified, as time has gone by. The Royal Botanic Gardens, Kew, is one example of reclassification. The guidelines, published under the aegis of the Cabinet Office and no doubt with extensive input from the Treasury, say:
	"Most NDPBs will be set up with the intention of distancing the sponsor department from day-to-day decisions . . . Arrangements . . . will depend on . . . the degree of independence . . . it"—
	that is, the NDPB—
	"is intended to have".
	Both those statements are suitably cautious. Nevertheless, what lies behind them is clear: there is an acceptance of the principle which started, I believe, with Herbert Morrison, that there should be a distinction between strategy and policy on the one hand, and day-to-day operations on the other.
	One has to start from somewhere, and it seems logical to say that when it is policy to set up an executive non-departmental public body then it is a necessary condition that the body is confidently planned and expected to add value that the sponsoring department would not itself add. If it were not so, then why not leave the duties with the department? Since considerable time and expense are involved in establishing a successfully operating NDPB and in monitoring its performance, then its duties need to be both long term and such as to attract people with the necessary professional skills. For these conditions to be met, the NDPB needs to be appropriately independent, one criterion being its ability to survive changes in Secretaries of State and governments.
	An approach to the factors which govern and ensure independence starts with consideration of the relevant primary legislation. This needs to be clear and to delineate duties in a way which can be accurately interpreted and relied upon over time as an agreed basis for the dialogue between the NDPB and its sponsoring department. We should be under no illusions that that dialogue is almost continuous.
	If, in contrast, as in the Compensation Bill before Parliament at present, which provides for a regulator of compensation management services, nothing under this Act can happen until secondary legislation, which is the case, and if such legislation can be amended or revoked by further orders at any time, then independence is at a discount. Where there is no certainty, there is no independence. In another case it is most probably defects in primary legislation which have led the Standards Board for England into such a difficult and controversial early existence.
	A second test of independence is the system for appointing and employing the chief executive. As my noble friend Lord Norton of Louth said, the board will be appointed by the Secretary of State. However, sometimes Secretaries of State wish to take the power to appoint chief executives and to make them members of boards, thus taking away the board's prerogative to select and appoint its own chief executives. If done, this greatly reduces independence. Everybody concerned will conclude quite correctly that the Secretary of State is executively in command, not the NDPB board. Indeed if officials advise that they are having a hard time getting on with too-independent a chief executive and board appointment is not renewed, the chief executive's position becomes impossible.
	In this connection, it has been argued—as in the Explanatory Notes to the National Lottery Bill—that the Secretary of State should appoint the chief executive and another employee of the National Lottery Commission as members of the commission in line with normal commercial practices. But in line with which commercial arrangements? A moment's thought reveals that there is no read-across to quoted plcs, still less to private companies or partnerships. The explanation put is no more than another attempt to gain control, and thus to reduce independence.
	Thirdly, there are the powers of the Secretary of State to give directions. It has been understood that directions are included in Acts so that administrative matters can be dealt with. For example, NDPBs have accounting officers, usually the chief executive; there are agreed management statements and financial memoranda; the terms on which they will receive grant are laid down, as are accounting procedures; and there will be regular reviews. All this represents a proper approach to the control of public money, but it is when directions become general that the trouble starts.
	Detailed general directions negate the intention to distance a sponsor department from day-to-day decisions. The DCMS has become a leading proponent of general directions, having imposed on the Big Lottery Fund some 37 pages of detailed and prescriptive directions. Ministers have given an assurance recently in this House that these will be revoked, but the determination with which the DCMS imposes controls on its 47 executive NDPBs by way of directions, performance indicators and targets, shows clearly that this Secretary of State has little time for independence. In fact, there is and has been over the years a constant drip-drip erosion of independence despite the recognition from time to time that it is needed, that NDPBs need skilled professionals and the space in which to act independently if they are to serve the public interest.
	One reason for this erosion lies in the nature and culture of the Civil Service, which is uncomfortable with executive independence. I hope that my noble friend Lady Perry will not find this an over-the-top comment. Officials both think and advise with great independence, but all their actions are taken in the name of and under the responsibility of Ministers. Independent NDPB boards complicate their task, particularly when Ministers have to account for things that have not gone as they should. Therefore officials will normally seek to limit delegated authority to some acceptable minimum. A second reason is related. The executive, the temporary incumbent of any department of state, is always restlessly seeking more influence over unfolding events and an executive NDPB may well be able to add value, but it must be controlled. Credit must go where credit is due.
	We need a much clearer policy framework for the creation and sustainability of executive NDPBs. When Parliament decides that we need one, on which side of the line do the Government stand? Do they intend to appoint a board but then leave it with so little independence that the duties conferred might as well have been retained within the department? Or does it ensure sufficient independence for the NDPB to build a position of its own and to be untroubled by changes in Secretary of State and of government? In short, do we face more centralisation or can we hope for the decentralisation of decision making? In the longer run, do we head slowly but perhaps inevitably towards authoritarianism, or foster democracy? The pessimists will point to the fate of the Countryside Agency or the administrative merger of the Community Fund with the New Opportunities Fund, both examples of short-lived vulnerability. The optimists will return to the 40 bodies which did not start out as NDPBs, such as the British Library, the Royal Botanic Gardens, Kew, and the Wallace Collection. These and their peer group of older institutions can probably battle their way through all the assaults on their independence. Let us hope so.

Baroness Falkner of Margravine: My Lords, I, too, thank the noble Baroness, Lady Perry of Southwark, for this opportunity to examine the role of NDPBs in government. I do not profess to be an expert in this area and have therefore had to do a considerable amount of reading for the debate. The overarching question that comes to mind when one comes anew to the subject is: why are there so many of these bodies? Historically, one can see why there was a need to establish arm's-length organisations removed from the levers of power. It is clear that many serve their original purpose so well that they have become known and recognised as being rightly independent of government.
	One only has to look at the response of the public to the BBC/Downing Street imbroglio over Iraq in 2003 to see that the public had considerably more confidence in the BBC than in the Downing Street press office. I got the impression that the admission of the noble Lord, Lord Tunnicliffe, that the Government were "thin on talent" reflected public perceptions rather accurately. But I take his point that this thinness of talent was relative only, in his view, to the merits of quangos. Leaving aside particular non-departmental public bodies, we know that in general there is genuine public dissatisfaction with the conduct of politics and public life in this country.
	While I would not seek to exonerate the main political parties from their share of responsibility for this state of affairs, on deeper questioning it is evident that the dissatisfaction is linked to something broader. There is a general sense, on the part of the individual, that he or she has no control over things and cannot bring about any meaningful change. People feel that they have no control over the myriad issues that affect their lives: health, education, crime, transport—the list can go on and on. Yet when people are asked why they think they have no control—when they say, for example, that there is no point in voting because it would not change anything—most of them do not seem to be aware that many of the decisions that are taken around and about them are made not by politicians in the conventional sense, but by the 50,000 or so people serving on the boards of quangos.
	Many noble Lords have mentioned the figures, so I will not repeat them here. What is nevertheless clear is that the number of NDPBs is now higher than it was. If you add to this the increase in partnerships, and look at their accountability trails, you can see that there are some significant issues about exercising power with little or no democratic accountability. The noble Lord, Lord Norton of Louth, laid out with great clarity the different accountability mechanisms of NDPBs. I do not dispute that, but it is transparency that is critically lacking, even where there is accountability.
	I will touch on just three issues in this debate, although there are many more in this complex maze of power dispersal in this country. I will narrow my concerns to the areas of accountability, appointments and democracy. On accountability, the report of the Power inquiry into Britain's democracy—so ably chaired by the noble Baroness, Lady Kennedy of The Shaws—put it thus:
	"It is one of the troubling ironies of recent British political history that, just as the country's citizens expect to exercise more influence over the political decisions made in their name, the people who take those decisions have become more remote and less accountable. This is an unhappy paradox that cannot continue without serious consequences. Widespread and intense disenchantment with formal democracy may be just a foretaste".
	This goes to the heart of the matter. When people feel that elections do not change things, the next step from not voting is disengagement from other areas of voluntary activity. The evidence is beginning to show that this is, indeed, the case.
	In the past, wide areas of the public services were under the remit of local councils. The shift of power away from these bodies to unelected—and sometimes non-transparent—bodies, which was started under the Conservatives, has continued unabated under Labour. Committees now run our lives. The difference is that these days they are appointed by other committees, which are themselves appointed by Ministers. When local government is consigned to collect merely a quarter of what it spends, it is no wonder that the link between consumer and provider is lost. Why kick out your local council when it has no say anyway over health, crime or schools? "Just ignore it", people say. But try finding out whom to kick out when you cannot get the medical treatment or get your child into the right school, and you discover that you really do not know where the decision is taken because it was made by a faceless health authority or a city academy board.
	Should you be concerned about who watches the watchdogs, you will discover that the watchdogs are entirely happy to be watched by their sponsoring departments, with which they often have close financial and administrative links. The accountability, we are told, is from the quango to the department, and then through the Minister to Parliament. We know that this is, at best, a good theoretical argument which bears little resemblance in reality to the standards of accountability that we all want to see.
	Then we come to the area of appointments. In this area we have seen some real progress through the work of the Commissioner for Public Appointments. A relatively transparent, merit-based appointments system has clearly allowed more people from diverse backgrounds to serve on these bodies than used to be the case. The noble Baroness, Lady Gale, spoke of the under-representation of women on these bodies, so I shall restrict my comments to the other two categories—ethnic minorities and people with disabilities.
	We know that members of ethnic minorities are severely under-represented in Parliament and in other elected bodies. It is therefore encouraging to see that in quangos overseen by the CPA the figures for 2004 show that the proportion of ethnic minorities on boards was 6.5 per cent, a significant improvement on parliamentary representation. I hope that the Minister will be able to tell the House that the Government's 2005 targets of 7 to 8 per cent for ethnic minority representation have been met.
	As for people with disabilities, the situation is dire; this group is severely under-represented. For 2004, the figure in the composition of boards was around 4 per cent, whereas the figure for people who identify themselves as disabled is in the region of 18 per cent. When the Government set a target for ethnic representation in 2005, they failed to do so for people with disabilities, other than to seek an "increase" in their numbers.
	This is not special pleading, but, given that these structures are themselves removed from democratic accountability, it becomes critical that their decision making is reflective of all groups in wider society. I have seen from my own experience that the "stepping-stone" thesis of activism applies. When people who do not have the traditional profile break through at community level, they are likely to develop the skills and experience that might be expected, but they additionally bring "voice" to the debate that otherwise would not be heard. This benefits us all. We hope that the Minister will reassure us that the Government continue to remain seized of this matter.
	Returning to my overall point about democratic accountability, I think that the noble Lord, Lord Borrie, made a brave case in suggesting that quangos were good for democracy in that they allowed the public to serve in the formation of policy. I said that it was a brave attempt—brave but wrong. It was wrong in that this argument may serve to bring in some classes of the public—pale and male comes to mind—but what it will not do is satisfy the requirements for democratic accountability.
	I mentioned the loss of control over decisions that was identified by the Power inquiry, to which the noble Baroness, Lady Perry, also referred. The inquiry found that the shift to unelected or indirectly elected bodies had made,
	"political decision-making more opaque, hidden and complex".
	It found that the people who take key decisions are likely to be geographically, socially and politically distant from the people who are affected by those decisions. It also found that decision makers rarely engaged in dialogue with those affected by their decisions.
	A key step identified by the commission was to reduce the distance by expanding the capacity of elected power to scrutinise these bodies. It found that this may be the way forward to entering into dialogue with the holders of power. Given that I have quoted the report, it would be remiss of me not to mention that traditional political parties were not seen as the only way forward. Representation will not solve the problem by itself; participation is the answer. One way to enhance participation is to look at how we might consult the public in decision making. Perhaps, in looking at local government, we need to consider having directly elected councillors with responsibility for the delivery of healthcare, or independent community health councils with elected reps.
	An interesting suggestion has been floated by the Local Government Association. It calls for a next generation of local area agreements, as a sort of contract between local public service delivery partners and the community that they serve, which should be led by the council. In that model, a duty to co-operate would be placed on all partners, with local and central government agreeing national outcomes that local councils would undertake to deliver. The quid pro quo would be that targets would be off limits for central government; they would be drawn up locally by councils and their partners instead of being imposed centrally from on high, irrespective of conditions on the ground.
	That model would certainly enhance democratic accountability because, where local partners failed to deliver, the democratically elected council would be in a position to review and revise the terms of the contract, to monitor performance and delivery, and ultimately to have to answer to the electorate. It would certainly create a link between the elected and the officials, with accountability shifting downwards to the electorate.
	In conclusion, there is a range of ways in which power can be made more diffuse, as we are all agreed it should be. The challenge remains in finding the right mix so that the bodies exercising that power are more responsive to, and reflective of, public priorities. From our perspective on the Liberal Democrat Benches, there are several ways to do that. A Civil Service Bill to ensure the independence and impartiality of the Civil Service, watchdogs that are not themselves appointed by Ministers or too close to government departments, fiscal and electoral devolution, broader representation and fairer voting systems will all play a part in the dispersal of power. Those ways point to the reduction of NDPBs in our governance arrangements, and we hope to press for that outcome. When that happens, less really will be more.

Lord Henley: My Lords, I, too, offer my congratulations to my noble friend Lady Perry of Southwark on introducing this debate. In response to the noble Lord, Lord Borrie, I agree that the first half of the noble Baroness's speech was the very model of moderation. In my view, the whole of her speech was such a model. I am astonished at the moderation that she managed to maintain, as most noble Lords also did throughout the debate this afternoon.
	It is all too easy to be critical of quangos—or "non-departmental public bodies", as we should more properly call them. Indeed, the very word "quango" can be pejorative. Quangos incur the antipathy—indeed, the outright hostility—of some politicians, some in the media and many others. As they are unelected public bodies that wield power and influence over the lives of the electorate, people tend, on the whole, to be suspicious of them and their lack of accountability. Reducing their number has been the aim of all parties over the years. Last year, we on the Conservative Benches pledged to abolish some 160 of them, following the recommendations of the James report.
	Although reducing the number and expenditure of these bodies seems a straightforward enough project, in practice Governments can seem pretty reluctant to do so when it comes to the crunch. We all remember—certainly the Minister will remember—that back in 1995 the then Leader of the Opposition, now the Prime Minister, Mr Blair, pledged to "sweep away" the "quango state". The consultation paper published after the 1997 general election was entitled Opening Up Quangos. The Government's response to the consultation did not exactly add a spark to the promised bonfire of the quangos. Perhaps the Minister will comment on that in due course. The document that contained that response has been described as being in effect nothing more than a Cabinet Office best-practice guidance paper. There followed in 1998 more government proposals on quangos, in particular the extension of the remit of the Commissioner for Public Appointments over appointments to NDPBs.
	There have been a number of reports by the Public Administration Select Committee, but I particularly want to mention that of 2003. The committee's work has highlighted the basic lack of information about the quango state, such as the powers of various bodies and the way in which they are organised. Its calls for a comprehensive directory of government and for clarity of the status of quangos are very sensible, and were acknowledged as such by the Government in their response. However, that directory and clarification do not seem to have been forthcoming. I would be grateful if the Minister could explain what further steps the Government are considering with regard to creating that greater transparency in the way in which quangos are organised and in how they exercise their powers. The quango state is still opaque and confusing to the public, and greater transparency is still required.
	Despite this Administration's initial reforming zeal, the Government have not quite practised what they preached in all departments. It is worth drawing attention to one policy that the Government are pursuing that puts the creation of quangos at its very centre. The Deputy Prime Minister, before he was relieved of most of his duties some weeks ago, has been avidly pursuing his plans for regionalisation. Those plans have as their primary purpose the creation of yet another layer of non-accountable governance. At a time when waste in government bureaucracy is rife, the last thing this country needs are yet more public bodies spending more of the taxpayer's money, particularly regional bodies that have not been elected, when the whole concept of regionalisation has been rejected in the one referendum—in the north-east—that the Deputy Prime Minister saw fit to offer the country.
	I will not succumb to the temptation of reciting lists of quangos that are of questionable—indeed, apparently ridiculous—purpose. Such naming and shaming has already been well documented, and has been mentioned by my noble friend Lady Perry. It was particularly well done in a publication by Dan Lewis, The Essential Guide to British Quangos 2005, produced by the Centre for Policy Studies. His finding—that the Government still prefer to create quangos rather than to utilise the Civil Service to act as agents of government policy—is significant, as are the questions that he raises about the efficiency of this process of delegation of responsibility. His proposal to put a statutory five-year limit on executive quangos by subjecting them to sunset clauses certainly deserves some consideration. No doubt that is something that we can explore when and if the Government finally bring forward their promised Civil Service Bill. I accept that this might impose an unnecessary burden on legislative time, but if the Government ceased to legislate on things on which was not necessary to legislate, there would not be such constraints on time.
	Perhaps more interesting is Dan Lewis's recommendation that an element of democracy be introduced for the levy-funded bodies, with a statutory limit on the number of quangos per department. His report shows, however, that quangos have been a part of public life since the early 16th century. We can go back as far as Trinity House and its responsibilities for lighthouses. I understand that that is a quango, and it has been around since 1514.
	The noble Baroness, Lady Falkner of Margravine—and, I think, others—referred to the Power inquiry, which I understand will in a few weeks' time be the subject of a debate introduced by her noble friend Lord Goodhart, which we very much look forward to. The inquiry identified the growth in the powers of quangos as a,
	"primary cause of alienation from formal democracy".
	Its conclusion that measures are required to open up,
	"the world of unelected power and influence, particularly of quangos, to scrutiny and accountability",
	is one with which no one could sensibly disagree. But identifying those measures while at the same time retaining the advantages of delegating decisions to arm's-length bodies may prove to be harder in practice than in theory, as others have discovered. It will be interesting to find out what practical steps to increase the accountability of public bodies and the engagement of the public with them will come out of the debate into those recommendations.
	One area of concern before us—it was referred to by my noble friend Lady Perry—is the way in which the figures about quangos are being presented by the Government. Perhaps I may refer the noble Lord, Lord Bassam, to a Question that he answered on 15 December last year on the number of quangos. My noble friend Lord Peyton began by asking how many new commissions and other government bodies the Government have appointed in the past eight years with the task of implementing their policies. Dare I say that the noble Lord, Lord Bassam, was somewhat coy in his initial response? He merely referred us to some government publications, copies of which as always, we were told, were available in the Library. But coming under pressure from a number of others, by the end of the various exchanges—they continued for some time—in response to a question from my noble friend Lady Fookes, the noble Lord stated that he had,
	"given an accurate and correct Answer".—[Official Report, 15/12/05; col. 1362.]
	The answer was correct in that it referred to copies being available in the Library. However, one could not call it accurate; it contained no figures, so there was nothing to be accurate or inaccurate about. In his final answer, the noble Lord referred to the number of bodies having been reduced to 910—that was the figure quoted by my noble friend Lady Perry—from 1,128 bodies in 1997. Those are the figures provided by the Cabinet Office. In 2003, the total fell even lower, to 849. The figure is now 910 bodies sponsored by United Kingdom government departments.
	What we are not clear about is how accurate those figures are. I hope that the Minister will give us clear answers. Is that decrease due to discounting those public bodies that were previously the responsibility of the devolved Governments of Wales and Scotland? I have a sneaking feeling that if the noble Lord were prepared to give us what might be referred to as seasonally adjusted figures—referring to the Scottish and Welsh devolved bodies, despite the alleged number that the Welsh Government have managed to devolve—that reduction might not be as impressive as he would wish. I should be grateful if the Minister in his reply could shed a little light on whether those figures provided by the Government include all bodies that are now the responsibility of the devolved institutions.
	Perhaps the noble Lord will confirm another figure. Possibly a more accurate way of measuring the power exercised by the quangos is by their annual expenditure. That seems to have remained at approximately £25 billion per annum throughout those years, despite the alleged reduction in the number. That is a very large sum. It shows how powerful a hold some quangos continue to have on the governance of this country.
	The debate on the quango state shows that it is still thriving, despite what the Prime Minister sought to achieve when he was Leader of the Opposition in 1995. It is not diminishing after some nine years of a Labour Government. Unelected officialdom still plays possibly too great a role in the way in which our lives are ordered. We on these Benches look forward to a tangible reduction in the layers of bureaucracy that stifle the governance of this country. We look forward to hearing from the Minister exactly how and when the Government intend to achieve that.

Baroness Maddock: My Lords, before debating this Climate Change and Sustainable Energy Bill, I have to declare a few interests, like the noble Lord, Lord Whitty. I am president of the Micropower Council, a trustee of Carbon Neutral North East and a non-executive director of a heating company involved with combined heat and power. It will come as no surprise to people in the Chamber today that I very much welcome this Bill. As with all Private Member's Bills, it has not arrived here without a lot of emotional energy being expended and a lot of hard and tough negotiation. I have been there, as they say. As a Member in another place, I sponsored the Home Energy Conservation Act 1995.
	Before dealing with a few specifics, I wanted to say a little about climate change. Indeed, the noble Lord, Lord Whitty, did the same in his opening comments. We need to emphasise, especially for the doubters, that the vast majority of scientists in the world believe that climate change is a reality. However, a small minority of the world's scientists do not. Funnily enough, this week I received a report of a seminar that the Royal Society of Chemistry held last autumn. One thing caught my attention. It was pointed out that there is still a small and vocal minority who do not accept that interpretation of the scientific evidence. The very political nature of this debate has brought a new level of media spin to the otherwise sedate world of climate science.
	Andy Rowell, who is a writer and investigative journalist, reviewed some of the strategies that are deployed by some global warming sceptics. He particularly highlighted the large oil corporations, because they are funding policy organisations and think tanks to publish work questioning the link between climate change and fossil fuel emissions. I am pleased to say that I do not think that anyone taking part in our debate today has that view, but it is out there and we need to be aware of it. I regret that, in another place, one or two people did not want the Bill to succeed. I hope that that will not happen in this House.
	I especially want to speak about four areas. The first is the importance of microgeneration and, going with that, the second is the importance of targets. The third is the importance of microgeneration being included in permitted development status—something that the noble Lord, Lord Whitty, has highlighted. The last is the importance of local, decentralised energy schemes.
	Microgeneration is becoming very fashionable. In some quarters, it is the new, must-have accessory. We know that David Cameron is about to put a wind turbine on his roof. Malcolm Wicks has done the same. I believe that Alan Whitehead, whom the noble Lord, Lord Whitty, mentioned, has finally persuaded his council to give him permission for a small wind generator. Even Her Majesty the Queen is investing in micro-hydro in one of her estates, and is considering ground source heat pumps at Buckingham Palace.
	That is not surprising when we consider the capacity of microgeneration. The Energy Savings Trust, in its report for the Department of Trade and Industry, said that 40 per cent of our electricity needs could be provided by microgeneration by 2050. Not only will microgeneration technologies cut carbon dioxide emissions, they can also help to alleviate fuel poverty. The Fuel Poverty Advisory Group, in its submission to the government's draft microgeneration strategy, stated that microgeneration is an extremely important potential tool to combat fuel poverty, especially outside the gas supply area. We have had a debate in this Chamber today about gas prices. Because of rising energy prices, microgeneration will also be needed to relieve fuel poverty—in some cases, even where gas is available.
	Microgeneration technologies are also a powerful tool to engage consumers in the fight to tackle global warming. A report last year, Seeing the Light, from the Sustainable Consumption Round Table stated:
	"It seems that micro-generation provides a tangible hook to engage householders emotionally with the issue of energy use. Householders described the sheer pleasure of creation and of self-sufficiency".
	One householder said:
	"It's like growing your own vegetables".
	Another householder said:
	"I didn't realise before that it was the immersion heater running away with the money. It's made me more aware of where power is being used in my house".
	Another report this year from the Sustainable Development Commission, called, I Will if You Will: Towards Sustainable Consumption, recommended that,
	"the Department of Trade and Industry should set a 2020 target for roll-out of microgeneration across new and existing homes".
	It said:
	"Microgeneration . . . proved to be an appealing prospect, because it is something very positive and tangible that everyone could do in a visible way".
	It also said that,
	"the government should attach more weight to its potential to engage and motivate people in relation to wider goals regarding sustainable behaviour".
	In addition, Green Alliance argued in its new report on decentralised energy, Grid 2.0: The next generation, that we will succeed in tackling climate change and increasing energy security only if we take a step back and think about the purpose of our energy system and the role of individuals within it.
	If everyone from the Government and their advisers to influential think tanks such as the Green Alliance thinks that microgeneration is the way forward, I hope that we can achieve it. How do we achieve its full potential? I believe that this very important Bill, together with the Government's microgeneration strategy, which was published in March, goes some way to enabling that to happen. We hope that it will result in the removal of some of the barriers to the development— particularly the commercial development—of microgeneration technologies, because industry needs to attract investment if it is to mass manufacture these technologies. For that, it needs a certain future, and for that there needs to be a vision and targets, which was my second point.
	Targets are crucial, because they will provide the market the certainty needed to persuade people to invest the £30 million or £50 million that we need to enable there to be mass production. This mass production would virtually halve the price as well as the payback period. At the moment, the payback period is between five and 10 years; it could be halved to between three and five years. This is what is needed if microgeneration is to move from being a niche market product to a product for everyone.
	One of the problems at the moment is that micro wind turbines cost about £1,500. The planning application costs another £265. You will probably save between £80 and £150 a year, but that gives you a payback of between 12 and 20 years. This can be shortened, initially perhaps with grants and subsidies to help mass manufacture to get off the ground, but the planning application is a problem, as the noble Lord, Lord Whitty, mentioned. We really need to deal with that; it is covered in the Bill. We could get the payback reduced to about five years if we took away these barriers.
	Targets are crucial for three reasons. First, reducing CO2 is a numbers game, and each sector needs to know what is required so that it can help to deliver national aims, particularly given that the Government look as though they are on course to fail to reach their CO2 targets. Secondly, targets are needed to create a more level playing field. The Government have set statutory targets for energy efficiency and other firm targets for combined heat and power and renewables. We need a similar target for microgeneration. Finally, as I have explained in some detail, we need to create business confidence.
	I shall return briefly to permitted development. It takes a long time to get planning permission, and it costs money, but you do not need it if you want to install a dish to receive television these days. We are asking for the same for permitted development. It would help the manufacturers hugely, because at the moment they face having to negotiate with about 400 different local authorities to get the permissions needed to sell their products.
	This brings me to my final point; the importance of local energy schemes. As I mentioned earlier, the Green Alliance and indeed the noble Lord, Lord Whitty, have talked about the importance of community energy. There are currently about 1,300 sites in the United Kingdom with a combined heat and power generator, but they are generating only about 6 per cent of our electricity. More needs to be done to enable this to happen.
	Community-based schemes are exceedingly important because they take us back to my previous point about engaging consumers. Community schemes can empower communities and create employment. A wide variety of groups support this. The Country Land and Business Association for example, is promoting combined heat and power schemes using biomass as part of its rural regeneration policy. Community energy schemes can also use waste products to provide heat for the heat station, which will provide not only heat but electricity.
	Finally, I turn again to my own Act, the Home Energy Conservation Act. The Bill we are considering today will require the Government to prepare a report on how local authorities can promote energy efficiency and microgeneration. Councils will then have to consider this when discharging their functions. I hope that this will reinvigorate the Home Energy Conservation Act and all the processes that go with it. It is much needed. As I have said in this Chamber before, I think that the Government over the years have not used it as fully as they could. We had a debate in this Chamber not long ago on the energy efficiency report from the House of Lords Science and Technology Select Committee. It also emphasised that if we are going to reach our goals in climate change, local authorities are one of the ways of driving through these policies.
	As I have the Minister here, I would like to highlight for him one thing that I have discovered. When we sell houses in the future we will, of course, have home information packs which contain an energy report. But I understand that the details of the energy performance of homes will not be available to local authorities. I know that we do not want to give individual figures about what people are paying for their electricity and so on, but information on energy performance would make such a difference to local authorities in gauging how successful they are going to be.
	In conclusion, this is an excellent Bill. It opens doors for action at an individual and community level. It includes the kinds of actions that can really make a difference and I hope that it receives a speedy passage through this House.

Lord Tanlaw: I am delighted to see that another Private Member's Bill has come before us. Mark Lazarowicz should be very much congratulated, having gone through family bereavement, filibusters and goodness knows what else in the other place, to get his Bill as far as here. I sympathise with his worthy intentions; they are similar to those in a similar Bill that I put before your Lordships. The only difference is that this Bill will seem to bite in 2050. The Bill that I put before the House would start this October. I will come back to this point later, but I feel that there should be some kind of statement made as to why that has happened.
	This Bill has received Government support; it has received support from all parties. A Bill that has produced very similar ideals received no support from the Front Benches—only from the Back Benches. I think I understand why now and this will become clear to the House. I take this opportunity to declare an interest because I hope to touch on carbon emission, Railtrack and conductor rails, in which I have a specialised interest.
	Thirty years ago I was the first parliamentarian to produce in front of this House a case for doing something about the greenhouse effect. It was met with bemusement and bewilderment. But the scientists were quite clear in giving us a warning and that warning has not changed. The numbers 30 years ago are exactly the same as they are today, although there will be upper limits of those numbers that were given at that time.
	It was my hope that we as politicians would be the only people who could deal with the problem. The scientists have a duty to warn us, but it is up to politicians to put controls on business and to control the Executive, and to see that the problem is met properly and efficiently. But I am afraid that that has not been the case. I have to ask why it is that Al Gore and Sir David Attenborough are making films today when they should have made them 30 years ago. Absolutely nothing has changed. The greenhouse effect was alive and well, warnings were given, but we have had to wait 30 years for a film or any real interest from politicians and the realisation that something has to be done. Then we have this Bill, which will put windmills on houses. I am sure that it is a great step forward, but I do not think it gets to grips with the basic problem. In the debate held in the other place, Conservative MPs were questioning whether there is a greenhouse effect. They are still questioning the science. Of course they are entitled to their views.
	I want to raise my special interest, which may be just a small matter of microgeneration. Why is it that the chairman of Network Rail, who is also chairman of the Carbon Trust, is laying down steel conductor rails? For the technically minded, steel conductor rails have very poor conductivity and release for every passenger kilometre 46 tonnes of carbon, and increase the electricity bill by 13.5 per cent. The chairman of Network Rail has no shareholders to complain about this at the AGM. He does not mind how much electricity is used or how much carbon is shoved into the air, but as chairman of the Carbon Trust he jolly well should.
	What is happening here? After 30 years of everyone knowing what is going on, very little is being done, although I am glad to see this Bill because at least it is something. Why is nothing happening? Two things have developed. The first is that the party managers, to whom I have referred in connection with my own Bill, have seen that nothing can be done about this problem during the five years in which a political party is in power. Indeed, perhaps I may ask the Minister who is to reply to the debate by how much carbon emissions have been reduced or have increased during the time the Government of New Labour have been in power. I also wonder about the Executive. Kyoto was a godsend to Executives all over the world. They could see that this was a way to expand their civil service offices throughout the world on a subject which would have no end.
	For this little Bill, I would like to know how many extra civil servants would be involved and how much extra office needed. Every other paragraph requires a report, a licence, a permit or a statement of some sort. But what would this energy Bill save today, or this week? If it is implemented during this Session of Parliament, how much energy would it save next year? When would it start to make what I would call a serious contribution to reducing carbon emissions?
	I want to raise an issue for the last time because I shall not speak about it again. How does it compare with daylight saving? According to the California Energy Commission and the US Department of Transportation, it would save approximately 1 per cent of the total national energy used in the United States. That has led to the Energy Policy Act 2005 which was signed by President Bush on 8 August last year. What is so different about people in the United States from those over here? When I asked the Minister about this, he said that daylight saving would not save any energy here. What is so different about our society? We are an industrial society and we stopped using lamplighters some time ago. The Minister said that according to the Building Research Establishment, people would leave the lights on.
	Let us suppose for a moment that we did have daylight saving, and let us suppose that it saved 1 per cent of the power generated for the national grid. According to my calculations—which I always suspect—it would save 2.85 million tonnes' worth of carbon being sent into the atmosphere every year. At 5p per kilowatt hour, it would reduce the annual income of the supply companies to £1.425 billion a year, of which they could get back £62 million or £63 million on the carbon rebate. If daylight saving is introduced in October, as my Bill suggests, it would begin reducing carbon by a very large amount: 2.85 million tonnes per year. How much will this Bill save?
	The Bill will change the face of suburbia. Microgeneration will be a fashionable word and a status symbol. The windmill by the garden gnome will be upgraded to the micro-wind generator on the roof, beside the satellite dish and television aerial. The roof will glisten with photovoltaic cells. The carp in the fish pond will give way to the heat exchanger. The Chelsea tractor will no longer sit on the tarmac outside. In order to impress the neighbours, or to keep up with the eco-Joneses, it will have to be a hybrid or electric vehicle, to show how much you care. That is fine if you are rich; by all means, use these displays of wealth.
	As a practical person, who has to work with engineers all over the world, I ask: one year after putting your windmill on the roof, will the television reception be as good as it was? Will you still be able to access the internet? Will you get a lawyer's letter from your neighbours because their television reception is also affected? I wonder about the cost of running a hybrid vehicle. It might be even more expensive than a Chelsea tractor. The heat exchanger might seize up in the carp pond. Another point about photovoltaic cells: who is going to clean them? After about six months lichen begins to grow on them. Their position on the roof will make them very difficult to clean, but with lichen on them they will not work as efficiently. That has to be a consideration in deciding where to put them.
	The other part of the Bill covers dynamic demand technologies. This is really excellent. It sounds like a good idea, but I wonder if they will become rather like speed cameras: well-intentioned devices that have ended up being feared and disliked by the majority of motorists. A mechanical fridge temperature monitor sounds harmless enough, but if it is operated from a central console with automatic controls, what happens in summer when a housewife turns up her fridge for extra ice cubes for the Pimms on the lawn? Will the control automatically turn down the fridge, resulting in no ice cubes? Or, worse still, will she receive a visit from the fridge warden, telling her that her fridge is set too high and she must do something about it?
	I am being frivolous, but I will be super-frivolous for a moment, because I am coming back to leaving the lights on. This is a problem for many housewives, including some friends of mine. When they open the fridge door the light comes on, but when they close it they do not know whether the light goes off. The Minister is always saying that daylight saving will not work because people leave their lights on. Will there be an indicator on these dynamic technologies which can reassure a housewife that when she shuts the fridge door the light has gone out?
	Sadly, I must come finally to something really rather serious. I said at the beginning, when we raised the subject of the greenhouse effect, that we in the political spectrum must give directions to, and control, the corporations, the suppliers of energy and the utilities. We must not be controlled by them. I am worried because I have asked the Minister about what would be saved on the national grid if daylight saving were introduced. The Minister has not given me an answer, and he will not do so today. Is there a reason for this? Is there any connection between political parties and the providers of electricity, or the utilities? I had hoped that there would not be, but, unfortunately, there is.
	With the help of the Library, for which I am most grateful, I have discovered that if you go to the Electoral Commission website—for those who are interested it is www.electoralcommission.org.uk/regulatory-issues/regdpoliticalparties.cfm—you will find a list of donations given by the electricity companies to the Conservative and Labour Parties. In Scotland, the Scottish Labour Party has been supported by Scottish Power; in Wales, the Welsh Labour Party has been supported by Western Power; the national Labour Party has been supported by Powergen, which is now called E.ON; and in the south-east, the Conservatives have been supported by Seeboard plc, EDF Energy and various others. It is all there.
	This is an unhappy connection. I feel that some statement has got to be made about whether there is a connection between the political parties and the generating companies. If reducing the emissions of carbons into the atmosphere is to mean something, there has got to be a very clear distinction between the political parties—and all of us are liberals, although I do not know who they support—and the generating companies. How can the political parties and the Government give orders to the electricity companies, Network Rail and so on to reduce emissions if they are not really involved in the matter?
	It is rather sad to end like this because 30 years is a long time. I just wish I was 30 years younger. When I listen to this debate and I hear the wonderful words of the noble Lord, Lord Whitty, and the other speakers, I am amazed at their sincerity and the efforts they are making outside parliamentary time because I do not do those sort of things. Nevertheless, I feel sad that we cannot do anything unless we, as politicians, can get a grip on the commercial corporations that are running the energy industry in this country. We need to get a grip on the utility companies and do something about this, but in slightly greater detail and with slightly wider terms of reference than are in this Bill, which I wish well.

Lord Lucas: My Lords, I, too, shall trespass in the gap. First, I wish to ask an Eric Forth memorial question. I shall miss him. How do the noble Lord, Lord Whitty, and the Government justify the draconian powers in Clause 13? I shall not rehearse the arguments. They were well rehearsed in the Commons. I should very much like to know their opinions so that I can judge what we should do in Committee.
	Secondly, my plea is directed at the noble Lord, Lord Sainsbury. Since we are starting to take this subject seriously and it is impacting on so many aspects of our lives, it would be enormously helpful if we had a real currency to talk about. Since we are trying to control carbon emissions, can we consider these issues in the round in terms of the effects of a decision on lifetime carbon emissions, on the carbons used, the carbon dioxide generated per unit of consumption, or whatever? For instance, on cars the only evidence I can find is a study conducted in Canada, for most of which you have to pay a large sum of money, but which shows clearly that in units of carbon generated per mile the hybrid cars which are all the rage now are relatively inefficient. In fact, the poor old Ford Focus which I am pleased to drive comes near the top of the list. When you look at the lifetime costs, in particular in terms of the costs of producing the equipment, you get a very different picture than from considering the consumption of fuel, spare parts, or whatever. If you consider microgeneration paying back over 20 years, I very much doubt that that would be done at an energy cost equivalent to that when supplied by microgeneration. So I suspect that you are looking at a net carbon loss from that small outfit. But if we are looking at carbon generation, that is the currency we should be allowed to consider. We need more information to do that better.
	Several noble Lords have mentioned leaving the lights on or turning equipment off. Again, the issue needs a whole House approach. Leaving the light on is a very efficient way of heating the House. It probably saves you money compared with having the boiler on. So in winter, you should leave the lights on and you would save energy because of the way the energy is distributed through a light. Compared with electric heating, it is probably more efficient. We need to consider these matters honestly and in the round.
	We have to face up to the consequences of our energy consumption habits. Covering the place with windmills may seem uncomfortable, but it is a consequence of what we are doing. To me it is unacceptable to try to export that cost by ripping up the forests of south-east Asia and covering the area with oil palms so that we can proudly say we are using biodiesel. We have to face up to the consequences of our energy use habits; we have to say that burying old newspapers is unacceptable; we have to burn them and use them in CHP plants. In doing that, I hope that the Government will explore a way of compensating those of us who end up living next to such installations. It is not pleasant living next to incinerators; they generate so much traffic and other things. Would it not be possible to allow people who live close to such a plant to benefit from cheap power?

Baroness Miller of Chilthorne Domer: My Lords, we on these Benches are very grateful to the noble Lord, Lord Whitty, for introducing the Bill. It contains many measures that we have called for over time and many measures that we debated with him when he was Minister for Defra. I recognise the part that he and my noble friend Lady Maddock played in the organisations to which they both referred when they declared their interests. They have played a tremendous role in bringing forward these very practical measures.
	The noble Lord, Lord Whitty, mentioned Al Gore and David Attenborough and the part that they have played in raising the consciousness of the public. Although I recognise the frustration of the noble Lord, Lord Tanlaw, in the length of time that that may have taken, nevertheless, consciousness has now been raised, although the danger is that unless the public can do some very tangible things, they will descend into depression and perhaps denial. It is one thing to be told that this is happening and that it is dangerous, but if there is very little that an individual can do about it that simply breeds despair.
	The practical measures in the Bill are particularly important. Although it is a starting point, it is an extremely important one. The role of the UK is mentioned in the first clause of the Bill:
	"The . . . purpose of this Act is to enhance the United Kingdom's contribution to combating climate change".
	The United Kingdom contributes in two ways. The first is by reducing its own emissions, as the Bill intends we should, at a much more effective rate. The noble Lord who asked whether emissions had increased or decreased over recent years will be depressed to know that they have increased. Not only should we decrease our emissions, important though that is, and lead by example, as other noble Lords have mentioned; we should also generate an absolute hotbed of research and development and innovation. Stimulating the economy to produce various types of generation economically will play a critical role in how that technology is spread throughout the world. Only recently, technology developed off the coast of Scotland was bought by Portugal for use there.
	That kind of technology will be critical with the populations of developing counties such as China and India looking for a way to develop economically, but within environmental parameters that will not endanger the entire planet. The noble Lord, Lord Sainsbury, will of course recall that, over time, he and I have debated the issue of tidal lagoons. China, indeed, is interested in tidal lagoons. Would it not be wonderful if off the coast of Britain the first pilot tidal lagoon was created? No money from his department is needed, only private finance, but such technology needs encouragement and assurance that the regulatory framework is as friendly as possible. It has tremendous export potential for a country such as China, where the tidal rise and fall are equivalent to ours. Looking around my own area of the Severn estuary and up the entire west coast of England, that technology has tremendous potential. Perhaps the Minister would comment on where his department has got to in supporting it—as I mentioned, I do not mean financially.
	My noble friend Lady Maddock talked about the importance of microgeneration and of targets which are particularly crucial for all the reasons that she mentioned. She referred in her speech to the document I Will if You Will, which the Sustainable Consumption Round Table produced recently. It makes several good suggestions in its section on recommendations for our homes, which are particularly relevant in our debate this afternoon. Critical to that is improved householder feedback about consumption, because the roundtable's members have discovered that that appears to be a cost-effective way to tackle energy demand.
	The roundtable is asking for legislation to be introduced to enable Ofgem to implement a national meter replacement programme by 2012, which is a short timescale. It would ensure that all households can benefit from smart meters which enable households to monitor and manage their own energy use. Smart meters would tell one exactly how much energy one is using at any one time. They make plain, for example, the effect when one turns off an appliance—the TV left on standby and so on. I am pleased, as I know my noble friend Lord Redesdale is, to see the clause in the Bill about the dynamic demand technology, which is important. We have the technology so we should not have to use more energy than is necessary.
	The important role that local councils can play has been mentioned and was mentioned in the I Will if You Will report. Beyond piloting schemes that show what can be done, they can take a role that Braintree council chose to pilot, for example, which is offering one-off council tax rebates for households. I ask the Minister if he thinks that that is a reasonable way forward. The recommendation in this report is that the Treasury, Defra and the ODPM should review nationally the potential for rebates on council tax and stamp duty to reward more sustainable households. If households started to implement many of the Bill's measures, would they be able to benefit from such a measure as this? Councils could not offer the rebate if they were not able to claim back the money nationally because of the way in which council finance is currently set up. That would not be a practical way forward. They are already squeezed until the pips squeak.
	While I am referring to councils, I would also like to highlight a particularly innovative approach taken by Chesterfield Borough Council—which incidentally and for entirely justifiable reasons was Liberal Democrat green council of the year. Besides implementing some of the other innovations that I acknowledge other councils have taken, such as putting photovoltaics on the roofs of public buildings and so on, Chesterfield has also forged a very exciting partnership with Barratt Homes. The latter agreed to the council's request that 10 per cent of the properties in a new development of 280 homes would be equipped with solar panels. I accept that that is only 28 homes but it is a start. It shows people that it is perfectly possible for a recognised housebuilder such as Barratt to equip new homes with solar panels. Barratt's East Midlands managing director states:
	"Barratt is the country's most forward thinking builder"—
	he would say that, wouldn't he?—
	"especially when it comes to incorporating environmentally friendly features in our new homes. Chesterfield Borough Council is also a leader in the field and we feel this is the ideal partnership".
	We need many more such partnerships. Besides being a showpiece development which encourages other housebuilders to incorporate that technology, it also shows consumers in Chesterfield what solar panels can contribute.
	At this stage I ought to declare two interests. First, I received a grant from the DTI to install solar panels on my roof. At this time of year we do not need to run our boiler to have boiling hot showers. The effectiveness of solar panels in heating water, even on a cloudy day, has been a complete eye opener. Secondly, I declare an interest as patron of the Somerset Trust for Sustainable Development, which encourages measures such as those mentioned in the Bill. It has just finished its first development of homes in Langport, which makes use of such obvious measures as passive solar gain. That does not even require the installation of specific technology; it is just a question of angling the house so that the biggest windows capture the sun's heat. The houses in the development have incorporated in them very clever blinds which mean that in the summer householders will not need air conditioning, which is a danger of too much passive solar gain.
	The noble Lord, Lord Judd, made some extremely telling points. His comments on pylons and transmission are incredibly important. If households generate as much energy as they can and save as much as they can and communities have community generation schemes, a localised network can be established. The enormous transmission schemes to which the noble Lord referred, which comprise pylons which have desecrated some of our finest landscapes, are also incredibly wasteful. Can the Minister say exactly how much electricity is lost due to the way in which the grid operates?
	I share with the noble Lord, Lord Lucas, the feeling that Clause 13—I am sure that the noble Lord, Lord Whitty, will explain why it is important—grates slightly with the rest of the Bill, which is about carrots and enabling. After all, the Government have not done an awful lot about upping the building regulations requirements in this regard—over the years they could have required much greater improvements, as we have called for—but suddenly, rather than enabling and encouraging, Clause 13 mentions prosecutions. I am sure that the noble Lord, Lord Whitty, will tell us that there is a good reason for that. It will be interesting to hear it.
	We on the Liberal Democrat Benches hope that the Bill has a swift passage through this House. It contains many measures that we welcome. We look forward with great excitement to its passing into law. Having given the Bill a very broad welcome, I regret that the Government did not introduce a similar Bill themselves some time ago, and that a Private Member's Bill, with all the limitations that such a Bill entails, has been introduced to tackle the matter.

Lord Dixon-Smith: My Lords, I, too, thank the noble Lord, Lord Whitty, for introducing this Bill and for the clear outline he gave of its detail, intentions and purposes—particularly because it spares me the need to carry out that responsible act in any way, shape or form.
	I sympathise with the Minister who, in a sense, has to reply to the debate, although it is for the noble Lord, Lord Whitty, to make the final response. The Minister has to answer for the Government and it is the second debate on energy today in which he has had to do so. I sympathise with him because we have ranged across a broad spectrum of issues, many of which are not particularly relevant to the content of the Bill.
	The Bill is welcome. It has achieved a wide measure of all-party support. I am sorry that the noble Lord, Lord Tanlaw, finds that somewhat irritating, but he has a right to be proud that the irritation that he has caused over the years—if he will forgive me—is at last bearing fruit. I was slightly disappointed that he felt slightly let down by what has happened in the past. There is a sense of irony about the Bill in that it has received, as far as I can see—and I have looked carefully—far more attention in the Commons in terms of time and detailed examination than the vast majority of government legislation does. That is peculiar and I hope that the Bill is thereby in a much stronger position than it otherwise might have been.
	Anything that raises the profile of environmentally friendly action to combat climate change is welcome. This Bill is particularly welcome because it brings about the prospect—I put it no higher than that—of very local and even individual action. That applies particularly to microgeneration; but that will, I guess, be subject in the end to the same rules as the fields of insulation and energy conservation. The person who wants to install and enjoy it will look at a financial equation. If people can see a return for their investment, they will do it. If there will be no return for their investment, they may well not go ahead, however unfashionable that might be. That is important because generation at the domestic level will not be cheap. I agree with everything that has been said about the need to try to encourage people by keeping regulatory controls as simple as possible for individuals. If the installation of wind generators up to a certain capacity can be made free of the need to apply for planning permission, that can only be good. Although that is not stated in the Bill, the possibility is raised and I hope that the Minister will say that it will be looked at extremely carefully.
	I am concerned, however, because there will be a need for well qualified installers of such equipment. One will no longer be putting light items of equipment on our roofs—they will be more weighty and will have a dynamic effect. Structural issues have to be addressed before one can bolt such equipment on a roof. There will need to be professional advice in that regard, just as there will need to be very competent and thorough electrical installations within the house. If the surplus supplied by these generators is to go into the grid, careful recording and the highest standards of technical installation will be required. I would like to hear what the Minister has to say on that aspect. I do not wish to put obstacles in the way of this matter, but if it is going to be done, it must be carried out properly—it cannot be a DIY operation.
	A part of Clause 4 is out of tune with the rest of the Bill. I hope that the noble Lord will forgive me for putting it that way. Clause 4 deals with setting national targets for microgeneration. Subsection (2) states that the regulation,
	"does not apply unless on 1st November 2008 the Secretary of State considers that it would be appropriate to designate one or more targets".
	The purpose of the Bill is to encourage people to start installing this equipment, yet it says at the beginning that the Secretary of State can put a complete stopper on it by not designating targets. I wonder why that subsection is included, or indeed if it is necessary at all. I doubt it, but that is an issue for later discussion.
	One of the puzzles of microgeneration of electricity—indeed, of all electricity—is that once it is generated, it has to go somewhere. In that respect, Clauses 7, 8 and 9, which make arrangements for the connection of houses to the local grid to supply electricity, are vital. It is not just a question of making the connection. I go back to what I said about the financial equation for people who put this equipment in their houses. The question of price will be significant. Of course that cannot possibly be in the Bill, but if the Minister would like to reveal the Government's thinking on that aspect, it would be welcome. Depending on that response, it might also be extremely encouraging.
	We have touched on the review of the permitted development order, so I need say no more, except that that will be very welcome. We then come to the energy efficiency commitment being changed to carbon emission reduction targets. In effect, the energy efficiency obligation will become a carbon reduction target obligation. That, again, is very worth while because it makes plain what we are trying to do. I wonder whether a carbon reduction target will work.
	Not least of the problem with the energy efficiency targets has been on the question of home insulation—this is particularly important when dealing with the energy poor. When a higher degree of insulation is put in, the immediate reaction of the person living in the house is to have it warmer than he did previously. There is no saving of energy. I suspect that when we try to improve home insulation, the reality is that we do not save carbon emissions. Most people will decide that having insulated their house, they can have it three or four degrees warmer than they were accustomed to do. That is natural; we all do it and we should not decry it. There is a natural desire to improve the way we live, and people will do that if they can. We need to face that difficulty.
	I always worry about the failure to make a proper distinction between energy efficiency and energy economy because the two are different things. The quickest way to illustrate that is to note the Airbus A380 which flew into Heathrow last week for the first time. It is a wonderful plane, and it will have the lowest fuel consumption per passenger mile of any current aircraft. It will be exceedingly fuel efficient. Its purpose is the expansion of aviation. I would place a considerable bet that the advent of that particular aircraft will lead to more people flying to more places and greater aviation commissions. I do not decry that. We must accept that it is so, but we need to recognise that there is a clear distinction between energy efficiency and energy economy and that they are not synonymous.
	That is all I need to say on the Bill at this stage. But I cannot resist making one final point. There is the section on renewable energy, renewable heat and the definitions required for renewable sources of energy. I wonder whether waste heat—and the noble Lord, Lord Whitty, will sympathise with this—is not itself a renewable resource. If we are wasting it, and if we know we are going to continue wasting it, and we start to use it, should it not be a renewable resource in the list of definitions?
	The Bill is welcome. I hope it will have a fairly speedy passage through the House. There are matters which will need discussion in detail. I look forward to the Minister's response and to the reply of the noble Lord, Lord Whitty, in due course.

Lord Sainsbury of Turville: My Lords, I am grateful to my noble friend Lord Whitty for the clear manner in which he introduced this Bill. We have had an informative and wide-ranging debate, and I would like to set out the Government's position on the Bill.
	Climate change is without doubt the major long-term threat facing our planet. Melting ice caps and violent weather extremes are no longer "possible future events"; they are happening now. Every week, authoritative scientific studies warn that, without urgent action, this may just be a taste of our future. That is why tackling climate change is a key priority for the Government.
	Our record on addressing the levels of harmful emissions that contribute to climate change is good. We are on track to meet our Kyoto Protocol commitments, with emissions of all greenhouse gases projected to be approaching 20 per cent below 1990 levels by 2010. But we recognise that there is more to do to meet our more ambitious target of a 20 per cent reduction in carbon dioxide emissions by 2010 and to ensure that we are on the right track to meet our long-term target of a 60 per cent reduction by 2050, which is where microgeneration can play a role.
	Microgeneration is a generic term for a suite of technologies that allows the production of heat and electricity in close proximity to the consumer. When we talk about microgeneration, we are talking about solar power heating our water and producing our electricity, about harnessing the wind through individual micro-wind turbines and about using the earth's heat to heat our homes through ground-source heat pumps.
	These technologies could make a significant contribution to our long-term targets for reducing carbon emissions. A study by the Energy Saving Trust suggested that microgeneration could reduce household emissions by 15 per cent a year by 2050. Also, by exploiting our own natural resources, increased levels of microgeneration would reduce our reliance on imported fuel and contribute towards our objective of secure energy supplies.
	The Government have long recognised the potential of microgeneration. We have supported microgeneration installations by householders, communities and businesses through capital grant programmes since 2002. Our "Clear Skies" and PV programmes contributed £53.5 million. These programmes have been superseded by the low-carbon buildings programme, which opened for business in April this year. Initially, the programme had £30 million to allocate, but the Chancellor gave a clear demonstration of the Government's commitment to microgeneration by announcing in this year's Budget an additional £50 million of funds, taking the total to £80 million.
	Creating a sustainable market for these technologies will not be done solely through capital grant programmes, which is why we have published a microgeneration strategy. This strategy outlines a series of actions to be taken in order to remove the barriers currently preventing widespread take-up of microgeneration technologies.
	This Bill gives the Government the powers to take forward several of those actions in ensuring that exported electricity is rewarded and that access to renewable obligation certificates is made easier for microgenerators. Both of those will provide some monetary benefit to the microgenerator, helping to offset the up-front costs. The Bill also contains clauses pertaining to microgeneration targets. It is too difficult to set realistic targets at the moment, given the early stage of the industry, but we agree with Clause 4, which provides a period of around 18 months to take a decision on targets. This will allow time for further investigation into the effect that targets would have on the uptake of microgeneration and for an assessment of the impact that the policies in the microgeneration strategy have had.
	The Bill has other important clauses. It engages local authorities. Some local authorities are already exemplars in the battle against climate change—Merton, Croydon and Woking are the oft-cited trailblazers. The Secretary of State's report under Clause 3 will arm all local authorities with the knowledge that they need to take steps to reduce emissions, to promote microgeneration and energy efficiency and to reduce fuel poverty. Clause 20 gives parish councils the powers to promote energy efficiency and microgeneration, creating the possibility of real local action.
	Building regulations and planning policy are key issues for microgeneration. The tougher emissions limits in the new Part L of the building regulations, together with the code for sustainable homes, will make microgeneration technologies an ever more attractive option to developers trying to meet these requirements. However, this Bill gives the Secretary of State the ability to make future regulations, specifically in relation to microgeneration. It also makes some changes to the rules governing prosecution for breaches of the building regulations, which will help local authorities to tackle the issue of non-compliance. In terms of planning policies, the Bill commits the Government to reviewing the consent regime that regulates installation of microgeneration, with the aim of removing unnecessary controls—that measure could considerably facilitate the installation of technologies such as solar panels.
	Clauses 15 and 16 provide flexibility in relation to future phases of the energy efficiency commitment. They will enable the Government to set wider "carbon emissions reduction targets", rather than the existing, narrower "energy efficiency targets", essentially opening the door for this mechanism to act as an incentive for microgeneration and other carbon-reducing technologies. The wider provisions will be implemented only following full analysis of the implications, and will be included in the consultation process for the next phase of the energy efficiency commitment.
	Dynamic demand technologies have been the subject of a couple of debates in this House. On the most recent occasion, we had the opportunity to discuss the Bill introduced by the noble Lord, Lord Redesdale, which aimed to promote these technologies. I do not want to go over the same ground today, but it is important to note that this Bill imposes a duty on the Secretary of State to publish a report on the contribution that dynamic demand technologies could make to reducing greenhouse gas emissions in Britain. The report will also address whether it is appropriate to take any steps to promote the use of such technologies and, if it is, what those steps might be. We are determined to understand what contribution dynamic demand appliances can make, and we are determined to ensure, if our report shows that work is needed to help to deliver the potential, that we can do so.
	The Bill also includes a number of reporting requirements. We are content to comply with such requirements, as greater transparency will help to raise the level of debate around these important issues.
	The final clauses of the Bill that deserve mentioning are the duties to promote renewable heat and community energy projects. We are already committed to promoting renewable heat. The Government has already supported renewable heat projects through the bio-energy capital grants scheme, the "Clear Skies" initiative and the community energy programme. Support for renewable heat will continue in the low-carbon buildings programme. We also recently published our response to the Biomass Task Force and committed to producing a biomass strategy, which will examine longer-term mechanisms for promoting renewable heat.
	Community energy schemes are an important tool in our efforts to combat climate change, and not just because they reduce emissions through the use of low-carbon forms of energy. Their real significance lies in the engagement of whole communities in the energy agenda. They can inform and enthuse communities about the benefits of low-carbon energy and the need to use energy efficiently. We are happy to continue in our efforts to promote such schemes.
	This is not a general energy debate—we have already had one of those—and it is not my role to respond to points about the Bill; that is for my noble friend Lord Whitty. Perhaps I could comment on two points raised during the debate that hinge on the question of why the Government are prepared to support the Bill. The first concerns comments made by the noble Lord, Lord Tanlaw. There are two issues here. The first is the Bill. I thought that his criticisms of the Bill were rather ill founded. It consists of a series of sensible steps in fields such as dynamic demand and microgeneration. Those are sensible policies to develop, and there is no point in casting doubt on the idea that those are sensible things to consider. They will involve civil servants, but all policies involve some civil servants to develop them. Their potential to help our energy policies is considerable.
	In particular, the noble Lord's remarks suggesting that government actions were affected by the sponsorship of electricity companies were unfortunate. The Bill, like other parts of our policy, contains proposals about energy efficiency—this Bill addresses dynamic demand—and policies to reduce the amount of electricity that we use. It is absurd to say that we are influenced by electricity companies in not supporting the noble Lord's Bill on daylight saving time. We are not supporting his Bill because, as I have said a number of times in the House, we do not believe that it would save energy. The one study that has been done in this country suggests that it will not. In the one example of real experience that we have—Portugal, which moved to a similar system—it was not found to reduce energy use. There are plenty of other reasons why we are not supporting that Bill, but it cannot be claimed that there is any strong case that the proposal would save energy. That is one reason why we are not supporting it.

Lord Whitty: My Lords, I am grateful for the widespread support for the Bill on both sides. Many of the points made went wider than the Bill, and many of them were directed at the Government rather than at the Bill. The Minister has responded adequately to the points that were directed primarily at the Government. As I said, I am very grateful for the support particularly of the Minister and Members on the Front Benches.
	I shall pick up on one or two points that have been made in the debate. The noble Baroness, Lady Maddock, has a long record of promoting Private Members' Bills, and her support for a clear policy that backs microgeneration and the need for clear targets was absolutely right. Industry often tells us that one of the problems that it faces is that it cannot be certain of the exact measures that the Government will have in place in five and 10 years' time. It is, of course, impossible to commit future Chancellors of the Exchequer to exact tax and fiscal regimes in that way, but the Government will be committed to a clear target for a certain time, which should help to give confidence to industry to invest in areas such as microgeneration and local networks, which the noble Baroness and my noble friend Lord Hunt said were very important.
	The second aspect of introducing microgeneration and local networks is removing the regulatory and planning barriers. The Bill provides a facility for doing both in relation to the price of electricity provided to the grid, to the Ofgem regulatory regime and to the permitted development orders, which could sensibly ease the installation of both local and individual microgeneration and more generally.
	It was not clear why the noble Lord, Lord Tanlaw, said in his initial statement that he thought that the Bill would bite only in 2050. It will bite immediately both on local authorities and on government by offering the possibility of a different framework from very early on. One hopes that it will be cumulative to 2050.
	The Minister has dealt with daylight saving. I shall say in passing that I was a partial supporter of daylight saving for the entirely different reason of road safety. I failed to convince my colleagues then, and I think that the evidence on energy is at best equivocal, as the Minister has pointed out. In any case, it is beyond the scope of the Bill.
	One or two other matters were raised by other noble Lords. My noble friend Lord Judd rightly said that if we were going to tackle climate change, it would be through the aggregate of a lot of small innovations and changes in the way in which we behave. That has aesthetic and social implications that have to be taken into account when determining the distribution of the cost of adopting new technologies. He was also right to say that energy efficiency and the technology for energy efficiency had sadly been neglected in the engineering and other sectors. We must think seriously about addressing it, because it can have economic advantages by making us competitive and putting us at the cutting edge of the industry, as well has contributing to climate change. He and other noble Lords referred to particular technologies that were slightly beyond the scope of the Bill, except tidal power technologies, lagoons and geothermal power, which are indirectly related to it. Some of them apply to microgeneration, but again they are partly beyond the scope of the Bill.
	My noble friend Lord Hunt rightly referred to the need for information in a simple form to which consumers and small businesses can relate. That, of course, could well be part of the obligation that the Bill places on local authorities and part of the measures that the Government's Statement will require from local authorities. The role of local authorities was rightly emphasised by the noble Baroness, Lady Miller, and others. Indeed, the importance of more local activity, right down to the level of parish councils, is an important dimension of the Bill.
	The noble Lord, Lord Dixon-Smith, also referred to the cost to the individual consumer or small business of introducing microgeneration. That is undoubtedly true; we cannot provide for subsidies directly with this Bill—it is a Private Member's Bill—but we are trying to remove the unnecessary costs of planning and regulatory burdens. The noble Lord also asked why there was an option for the Secretary of State to set an actual target in Clause 4. That is partly because microgeneration is still a technology which needs to be tested. There is therefore an objective assessment that the Secretary of State needs to make before the terms of a target can be set and we decide what technology will be defined by it. The noble Lord also referred to a wide range of technologies, which are all important in the bigger picture of tackling climate change.
	On Clause 13, my noble friend was right: the objective of Part L of the building regulations, only recently introduced, could be deeply frustrated were the resources and ability of building regulations inspectorates to be tied down to acting as soon as the building was completed. Many aspects of insulation may not be immediately apparent, but, once they have been discovered, there is a reasonable time limit, and the process is not draconian; it fits in with many other ways in which local authorities enforce building and other regulations.
	We have had a wide-ranging and positive debate. I hope to see that reflected in the Bill's subsequent stages. Clearly, some things are outside the scope of the Bill, and it probably is not appropriate to add whole new sections, but I hope that we can have some useful discussions on its detail. In terms of the very big picture, to which my noble friend Lord Judd and other noble Lords referred, this is one aspect of what ought to be addressed by the energy review. If the energy review is going to adopt processes for large power stations, whether nuclear, gas-fired or whatever, that is only one part of our energy strategy; the other part must be to encourage energy efficiency, greener forms of energy and to get the whole of the community fully involved in a push to combat and mitigate climate change.
	On Question, Bill read a second time, and committed to a Committee of the Whole House.

House adjourned at twenty-four minutes past six.
	Thursday, 25 May 2006.